There are several reasons to consider a short sale rather than modifying a loan or allowing your home to be foreclosed upon. A homeowner can get out from under crushing mortgage debt, experience lesser damage to their credit score, and qualify to buy a home within two years of the short sale.  From the lender’s perspective, a short sale costs less than the foreclosure process when it comes to attorney fees, the eviction process, damage to the property, and costs associated with resale. However, a short sale does have its downsides. The homeowner and the lender will be accepting a loss on the sale of the home. It makes sense to carefully consider both the advantages and disadvantages of a short sale before you agree to this course of action.


Credit Score Advantages

A short sale is less harmful to the homeowner’s credit score, especially compared to the effects of foreclosure. This process not only protects the seller’s score but also helps with purchasing a house in the future without having the burden of foreclosure on the credit report. Many clients report their credit score fell between 15-30 points if they were up to date on mortgage payments. The short sale is recorded as a “debt settled less than the full amount,” or “account paid in full for less than full balance,” or “paid as agreed,” or “paid as settled,” or “negotiated,” or “paid in a settlement but never late,”  or “account paid for less than full balance.” If the homeowner is delinquent when the short sale is finished, the credit score will not be as affected either. During this time, the credit score will possibly drop 50-80 points per loan that the homeowner was delinquent. Foreclosure effects on the credit score may last three years, whereas the credit score effects of a short sale are 12-18 months. 

Saving On Home Sale Fees

During a traditional home sale, the sellers cover the fees, including real estate agent commissions, which can be 3%-6% of the total home sale. During a short sale, the costs are paid by the bank. 

New Potential Buyers

A short sale could potentially bring in new buyers immediately. This type of sale avoids foreclosure signs, dangers to the neighborhood of having vacant and non-maintained properties that could become targets to vandalism or squatters. 

Reputation Is In A Better Light For Lenders

By keeping the home from being foreclosed, the short sale will not be in public records. Credit and loan applications ask whether a homeowner has been in foreclosure. Credit and loan applications do not ask homebuyers if they have ever short sold their home. 

There are some cases that the homeowner may be able to get paid by the lender to make a short sale. Short selling allows homeowners to avoid the negative impacts of foreclosure and be able to have the loans written off during a hardship. 


  1. Credit Score Impact

Short sales will be reported to the credit bureaus, which will harm your credit score. It will not be as much of a negative impact as a foreclosure would be, but it will decrease your credit score. 

  1. Long and Difficult Process

The short sale process, from trying to fill out the hardship package to listing the home, can take a long time.  You will likely find the process involved with many obstacles to overcome.

  1. Prolonged Time Of Closing On The Deal

The process of selling the home in a short sale may take more time due to the lender’s requirements. The lender does not have to move quickly, nor do they have to accept the terms of offers from buyers. You are at the lender’s mercy to allow the short sale to take place. 

Debt Rescue Law has helped many people with foreclosure, short sale, bankruptcy, debt settlement, loan modification, and student loan settlement. Contact us for a free consultation at (833) 707-1234.

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