Learn How Shorting Your Home Will Affect Your Credit Score

While short sales generally tend to hurt homeowners ‘credit ratings less than foreclosures, these transactions are a matter of public record and have some impact on homeowners’ credit scores. Exactly how much damage the short sale does to homeowners’ credit ratings depends on several factors. One of the most important of these factors is who handles the transaction. Savvy real estate agencies and foreclosure firms with experience negotiating short sales can often reduce the damage done to their clients’ credit ratings. Individual homeowners and real estate agents with no experience in foreclosure transactions tend to fare much worse.

Duration of mortgage default
Each late mortgage payment adds a black mark to the homeowner’s credit history, and the longer the sale transaction drags on, the more late mortgage payments will be posted to the homeowner’s credit. Sales that complete quickly tend to inflict less damage on the owner’s credit. This is all the more reason to find a professional foreclosure agent who can speed up the sale.

Forgiveness of deficiency
Whether or not the mortgage lender chooses to forgive the homeowner for the “deficiency,” or the remaining balance of the original loan, greatly influences the impact the sale will have on the homeowner’s credit. Loan companies may choose to accept a short sale, but they continue to hold the owner responsible for the deficiency, sometimes to the point of suing the owner. This can cause great damage to the homeowner’s credit.

However, foreclosure transactions that are expertly conducted will take precautions against the lender pursuing the homeowner for the remaining balance. Smart real estate agents and companies generally include protection against “deficiency judgment” lawsuits within the short sale negotiation.

How does a short sale affect my credit history?
Short sales, like foreclosures, remain on the homeowner’s credit history for seven years. However, the impact this has on your credit score can vary greatly, depending on the factors mentioned above. Sales that are made quickly and without a deficiency judgment could result in the restoration of good credit within 2-5 years. In less fortunate cases, restoring good credit can take up to seven years.

Find a short sales expert
The fact that an experienced foreclosure company or agent handles the short sale of your home in Michigan greatly affects the impact this transaction will have on your credit score. When looking for a foreclosure company, be sure to research the company’s history and references. Foreclosure agencies like Sun Law Group have a proven track record of completing foreclosure sales quickly and expertly, giving homeowners the best possible outcome.

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