In many cases, short selling occurs because the market is failing and home values have fallen accordingly. The price paid by the buyer should normally be at market value. Usually, your credit score will drop and fall substantially after a short sale. A common practice is to wait until a person has made three months of mortgage payments before approving a short sale.
This information is reported to credit bureaus. Short selling is reported as a paid or liquidated debt. Remember to talk to your lender about declaring short selling as a paid debt. This will cause less damage to your credit score.
What is a short sale? 10 key benefits of a short sale What does it take to complete a short sale? Understand a short sale (real estate), why would a lender accept a short sale? Why do homeowners choose to make a short sale? Is a short sale better than a foreclosure? How is a short sale different from a regular sale? What is the short selling process? Can I get relocation assistance for a short sale? How long do short sales take? What happens to taxes after a short sale? Buying a short sale Buyer's guide to short selling It all comes down to numbers. Banks and investors who own their mortgages are dedicated to earning money. In most cases, accepting a short sale will cost them less money than if they let their property go into foreclosure. The foreclosure process generally takes longer, the property remains empty, there is more risk of vandalism or damage, and in general, the legal fees involved in the foreclosure process can be costly.
By accepting a short sale, the lender can avoid the lengthy and costly foreclosure process. While the name may imply that a short sale is a quick transaction, it can be anything but. The short part of a short sale refers to the bank assuming a loss on the property, since the sale price is lower than the amount owed by the seller. The impact on your credit is a little different with a short sale, and while both can cause a significant drop in your credit rating, most short sellers recover in just a couple of years, while a foreclosure lasts up to 10 years.