How Does a Short Sale Affect My Credit?
Many people believe a short sale will have no effect on their credit. There are factors to consider with a short sale that are both negative and positive.
A short sale is most certainly not a foreclosure. When you perform a short sale, you sell your property below the amount of money you owe on the mortgage loan. The bank approves short sales because they want to get the most they can out of a property rather than risk getting much less at an auction. No one wants to have a foreclosure on his or her credit. A short sale is a much better option to consider if you wish to sell your property.
If you sold your property prior to a foreclosure auction and the property was sold for thousands more than what you owed on the mortgage note, the bank will not come after you for the difference. You didn’t pay the difference to the bank. Your credit report showed a short sale. You will be required to claim the excess amount of money in your taxes as income. You will have to pay taxes on this income and that is it.
A short sale still appears as a home you lost to creditors. However, it also shows creditors you did all you could to save it from going into foreclosure. A short sale doesn’t necessarily look good on a credit report, but it certainly looks better than a foreclosure does.
Many people don’t understand that a short sale on your credit does show that you have lost a home. Even though you didn’t foreclose on the home and you don’t have thousands of dollars charged in your name, it still counts as a loss. A home loan is a big commitment and requires the borrower to pay thousands of dollars to pay it off over a long period of time. A short sale just shows that you to get rid of your property quickly due to a change in circumstances. Some lenders views a short sale in a negative light while others will commend you for not letting your house go into foreclosure. It depends on the lender.
If you are facing foreclosure want to save your credit, you should sell your home in a short sale. Ask your bank if they will allow you to sell the property for less than what you owe on your mortgage loan. Chances are high that the bank will allow you to perform a short sale and your house will not have to go into foreclosure after all. Be sure you pay the taxes on the difference in the next tax-filing year.