When compared to other options, such as foreclosure and bankruptcy, a short sale has a substantially better impact on a credit report. Though short selling your home will not improve your credit and certainly won’t look good on there, it will help you keep your head above water and will not destroy you for the long run.
· Direct Impact on FICO Score
While people who have their homes foreclosed could see their credit score dip by 300 points, people who short sell their homes are looking at a loss of 80 to 100 points, at the most. This is because you are still giving the lenders something and in the end, you are showing the responsibility that lenders value.
· How Long Will I Have to Wait to Buy Another Home?
This is another area where short sellers benefit over their foreclosed counterparts. The waiting time for purchasing another home when you short sell is much shorter than the other options. In around 19 months, you can purchase another home at a decent interest rate. That means that you could conceivably be back on your feet in no time, establishing a new credit history.
Short Sale Deficiency Judgments
Not everything is positive when it comes to short sales, though. A seller could end up having to face a deficiency judgment, depending upon their home state. This payment could be as much as the full difference of the total loan amount and the amount that you pay. The laws on these judgments vary depending upon where you live, so it is important to review these laws in order to know what you might have in store. If you are held responsible for the repayment of such a loan, then short selling might not be a great option.
It will also be up to your lender to determine whether or not a deficiency judgment is in the cards. Because of this, having a discussion with your lender can often help you figure out what might be in store. A real estate attorney might also have some insight on this issue
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