The first thing I tell clients when doing a short sale is this, it will cause damage to your credit. There is no way around it. But, it’s important to understand when it’s completed it will be reported on your credit as an account settled for less than the amount owed. This is something that can’t be negotiated. This is regulated by the Fair Credit Act and the FTC. For more information regarding this please go to www.FTC.gov.
Most people ask me “How does it affect my credit?”, “What credit score drop am I going to have?” the answer to that is there is no way to predict this. I have talked to numerous different credit specialists and it basically comes down to three factors. The first is whether or not you have 1 or 2 loans. If you have 2 loans, that’s going to be essence to short sales report on your credit and a little bit damaging than just having 1. The second thing is, whether you make payments through the process or not. Because if you’re not making payments, what will happen is you will start suffering 30, 60, 90 days late reported on your credit and it’s going to be a different instance than the short sale in of itself. Lastly and most important is, what do you have going on in your credit history? I have clients for example who have multiple mortgages, credit cards, car loans, student loans etc. Those when people will have more things going on, typically don’t experience as great of a point hit than somebody who has nothing going on their credit history with the exception of this one loan and now defaulting in it. It’s going to be a little more severe for them.
I always follow up and talk to my past clients and talk to them about their credit after fact and see how it affected them. There have been numerous instances where I have married couples or partners on the same property, but when it was all said and done it affected their credit scores totally different. One person had a 50 point hit. The other had a 200 point hit. But in the end, it’s totally unpredictable.
The next question people typically ask me is “How long does it take to rebuild my credit score?” the answer is, it depends on what you have going on. I’ve had clients who have been able to rebuild their credit score in 10 to 12 months’ time. Other, who have nothing going on in their credit history and they don’t utilize it could take longer.
The good thing about doing a short sale and you credit is this, one, if you decide to have your property go to foreclosure, you would have to wait a period of 7 years in order obtain any other type of financing on a property that’s ultimately going to be backed by Fannie Mae. Next, I do have a lot of clients who are in the military and it can affect their security clearance if they allow it to go to foreclosure whereas with a short sale it typically doesn’t. I have clients who work in the financing sector, these might be mortgage brokers or people who work with personal financing and many times a foreclosure is absolutely going to affect their ability to even obtain their job but typically a short sale doesn’t. Lastly, I do deal with a lot of clients in civil service, these are people such as firemen, policemen, people who work at the district attorney’s office and many times they state to me that if they have a foreclosure it’s going to impede their job or ability to have one where as a short sale it does not.
With a short sale, you buy again much more quickly as oppose to a foreclosure with a 7 year wait period. With a short sale you only have to wait a period of 2 years it doesn’t mean you couldn’t go out and buy a property all cash, or does not mean you couldn’t go out and find some type of unconventional financing. But if you did you just have to understand you might be paying a higher interest rate or paying a few points up front. There are other lenders such as FHA or VA where the waiting period might only be a 1 year circumstance with a short sale. But in the end, in order to get a market rate or a conforming loan, you’re going to wait a period of 2 years. Lastly, I do let all of my clients know I do have the resources to get their credit repaired or restored. One resource I have educates clients on how to rebuild their credit score back up to what it was or as high as it can possibly be so that they can move on. The other resource I have is the have is to actually delete the short sale from their credit report. I don’t go in to this too much at this point and I don’t like it to be the sole reason the client decides to do a short sale. But this is my concierge service that I offer to my clients only. If you choose to use this resource, you can completely delete the short sale from your credit including all of the late or missed payments and thus you would not have to wait a period of time to buy another property, you can do so right away.
If you’re interested this, you can give me call and we could talk about it a little bit further.
This has been my presentation on Short Sales and Your Credit. Give me a call to setup your free, no obligation consultation over the phone and we can go over any specific question you have.
Thank very much and I look forward hearing from you.
Thank You very much for listening to my presentation on Short Sales and Your Credit