bobbyjimmy420, Both Buyer and Seller in Lincoln, CA

How much does a short sale affect my credit if I already modified my loan and my credit is bad? score 580 - paid house and not visa and amex

Asked by bobbyjimmy420, Lincoln, CA Wed Jul 24, 2013

How much does a short sale affect my credit if I already amodified my loan and my credit is bad? I actually have an oppurtunity for an "equity sale" but I might have to pay $5,000.00 to make up the difference because its all the buyer could do or all my realtor wanted to do so she could get paid faster than going through a short sale. My credit score is already pretty bad - 580. I almost feel like just going through the short sale just to save a couple grand because this "equity sale" after modifying my loan is going to cost me $90,000 of down payment anyway.

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Randall Ortiz, Agent, Sacramento, CA
Wed Jul 24, 2013
That's not much of a difference. I would try to convince the buyer to cover that difference, or find another buyer that will.
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Jim Walker, Agent, Carmichael, CA
Wed Jul 24, 2013
Genuine hardship, no liquid assets, no equity in other property. Gotta convince the lender of those things.
Bad credit score is evidence of hardship, but by itself, not proof.
Short sale process is a big hassle for seller and buyer. Agents have tough skins, so they take the hassle in stride, like a cabbie with a drunk passenger.
If you already settled with Visa and Amex, or will settle soon, or will Visa and Amex remain on cbr as outstanding bad debts for seven years? Get head to head with an unbiased expert for some one on one advise. Internet snippets from Trulia Posting Pros is entertainment. Don't rely on us online for this important decision.
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Sue Archer R…, Agent, Palm Harbor, FL
Wed Jul 24, 2013
First and foremost, the fact that you are selling your home for less than what is owed is similar to if you had a car accident, the car was totaled and the insurance reimbursement didn't cover your loan amount. You're responsible for the difference. The loan is yours irrespective of the value of the asset.

In the case where you are deciding to sell your home at this time, and there is a deficiency in the amount you recover to pay off your mortgage, you are obligated to pay the difference. A short sale, whereby you are asking the lender to accept less than what is owed, is only approved by the lender under 3 conditions: you have a hardship, you do not have assets that could pay the difference, and last, that you have a monthly shortfall in your income to cover your monthly expenses.

It is incorrect to assume that you have the choice to do a short sale just because you don't want to pay the difference. It is also improper to assume that realtors ought to surrender their commission to cover the difference. If they've done the service to sell the property, then they should get paid as agreed in their contract as well. (however if they choose to work for free that's all your own business).

In the case where you could qualify for a short sale by meeting those three criteria, then a short sale would have some negative affects on your credit but is recoverable after a short amount of time. If you pay the difference in the sale, you are free to buy immediately.

Last, we are still in a bit of an upward market. $5,000 is not a large differential. Maybe with proper marketing and a little time, you may get a price to help you break even with another buyer.
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Eddie Martini, Agent, Auburn, WA
Wed Jul 24, 2013
When do you plan to purchase again? If you are not comfortable with having to PAY to close your escrow and can show proof that you have a financial hardship then the Short Sale may be in your best interest. If you have the funds available to pay to get your home sold and have a desire to purchase again in the next 2-3 years then your equity sale is going to be in your best interest.

DRE# 01324382
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Keisha Mathe…, Agent, Elk Grove, CA
Wed Jul 24, 2013
Hello BobbyJimmy,

Although a short sale is better than foreclosure, if you can afford to pay the difference out of pocket, you will fare better. There are some small ramifications that make paying out of pocket better than a full fledged short sale.

The time it takes and the unpredictability of many factors that would need to be discussed before hand with a short sale specialist to determine which ones may affect your sale, are both good reasons to go traditional.

If you do decide to short sale, based on the question you are asking about your credit and how it is affected, ss it pertains to your credit, only late payments on mortgage will show, and after sale, mortgage is normally reported as ‘paid as agreed’, ‘paid as negotiated’, or ‘settled’. This can lower the score as little as 50 points if all other payments are being made. A short sale’s effect can be as brief as 12 to 18 months.

If you are not behind on your payments, and attempted to purchase a new property after completing a short sale, according to C.A.R.:

"The loan will be eligible for delivery to Fannie Mae provided that the borrower's previous mortgage history complies with Fannie Mae's excessive prior mortgage delinquency policy--that is the borrower does not have one or more 60-, 90-, 120-, or 150-day delinquencies reported within the 12 months prior to the credit report date--and the borrower has not entered into any agreement with the short sale lender to repay any amounts associated with the short sale, including a deficiency judgment. (Source: FNMA Announcement 08-16 Q&A, 8-13-08 ; FNMA Selling Guide, Part X, Chapter 3, Section 302.09. .)

Hope that helps.

Keisha Mathews, REALTOR®
CDPE®, HRC®, HAFA® Certified
SAR Masters Club Member 2012
SAR Masters Club Steering Committee
Mathews & Co. Realty Group
@ Century 21 Landmark Network
(916) 370-1803 cell
lic#: 01439130
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Morgan Larson, Agent, Folsom, CA
Wed Jul 24, 2013
What I'm gathering is that at one point you paid $90,000 as your down payment on the home you are currently living in. Currently, your credit score is approximately 580. You are wondering whether to pay the $5,000 difference to have an equity sale vs. a short sale.

The direct answer to your question is that it is unknown how much the short sale will affect your credit. Do you have other late payments on your mortgage? Any other liens? All of these things vary the degree by which a short sale affects your credit. Generally the hit is between 100 and 300 points.

Here are some other things to think about:
1. A short sale is on your record for several years and can make it difficult to purchase another home for 2+ years. How soon do you want to purchase again?
2. The home buyer who you currently have an offer from may not want to go through a short sale. Are you willing to start over with the home selling process?
3. Have you spoke with your agent about splitting up the cost of the $5,000 between buyer, seller, and agents? Maybe there is a compromise so no one has to go through a short sale, and no one has to lose too much money.

Best of luck - I hope this helps.
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