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Re: Short Sales

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Mzpatient
Member

Re: Short Sales

Can someone give me facts about short sales? I am attempting to put my house on the market but everyone is suggesting a short sale. I thought they affect your account negatively? Are there other ways of financing a balance if I am not able to sell the house for its full balance? I am not attempting to make a profit just to break even.

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Anonymous
Not applicable

Re: Short Sales

While there have been the occasional story where someone is allowed by their bank to take out a personal loan to cover the difference, it is rare.  Qualifying for a large personal loan is pretty hard and usually requires susnstantial FICO score, income, and assets.  Generally if you have substantial assets they will not allow you to do a short sale because the bank will reqwuire you to liquidate assets to cover the difference (which makes sense).  Doing a short scale has a very negative affect on your credit and future potential to buy properties.  IT can also cause a chain reaction on any credit cards or lines of credit you have.  When you default (and a short sale is a default becuase you are asking to get out of the full balance owed) other creditor see this and will often times close credit lines, lower limits, etc and thisin turn will lower your credit score further.  How much of a FICO drop should you expect, it is hard to tell.  It could be 50-75 points or it could be 200.  Part depends on if you miss any payments leading up to it, part on how it gets handled by the bank (and you have no control over this part), part depends on your overall credit file, etc.  Someone with an 850 credit to begin with who skips 2 payments leading up to the short sale could easily see his/her credit down in the low 600's by the time the stuff is done.  Someone with a 650 FICO who pays on time up until sale date may see his score only dip down to the high 500's.  Alot of variables.  One thing to remember is that for the most part, there will be restrictions on buying another property for a year or two (maybe longer with some banks/programs)  

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ShanetheMortgageMan
Super Contributor

Re: Short Sales

When you do a short sale, the account appears with the comment "Settled for less than amount owed" or similar, and if there is also a Manner of Payment (MOP) reported as anything but on 0 or 1 then your score can also be negatively affected.  Some mortgage lenders will require you go late on your mortgage before they'll approve a short sale.  You can ask your lender to convert the unsecured portion (the difference between what it sells for and what you owe) to an unsecured loan that you continue to make payments on after your home sells.

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