How Will A Short Sale Affect My Credit?

A short sale will negatively affect your credit, but not nearly as much as a foreclosure or deed-in-lieu ~ read this entire article for details on each alternative.

A short sale simply means that the amount of the mortgage balance owed is greater than the current market value of your home. Homeowners who are in financial difficulties and facing foreclosure often opt for a short sale in order to escape the foreclosure process. This is precisely the situation now across the United States where the sub prime adjustable rate mortgage mess has caused mass foreclosures and significantly reduced the value of real estate.

A short sale takes place when the lender agrees to accept less than the amount you owe him on your mortgage because you don’t have enough equity to sell the home and pay all the costs of the sale. And make no mistake, the lender must agree or you’re out of luck.

the effect on your credit report

You will suffer much more damage to your credit report with a foreclosure than you will with a short sale. It will also take considerably longer to restore your credit rating once your financial difficulties are resolved. In general, here’s what happens:

For a Foreclosure or Deed-In-Lieu of Foreclosure

- Expect about the same things to take place. Quite often this means a loss of between 200-280 points on your FICO score. A pre-foreclosure FICO of 675 could drop to as low as 395, essentially eliminating you from future credit approvals. It may be as long as three years before you can qualify for another home loan.

For a Short Sale

- Expect to suffer some credit score damage, but nowhere near as much. Loss of FICO points will be around 75-125 and your report will show it listed as a ‘pre-foreclosure in redemption’ which is far less negative. You will most probably be able to secure a new home loan in about a year and a half.

In any case, it is a good idea to consult with a lawyer, tax accountant (CPA) or a good real estate agent who is experienced with short sales. These professional may charge you a bit for their services, but failing to have the right counsel could end up costing you a sizable bundle. So don’t consider going it alone. Get the help you need.

Know Where You’re At

NOTICE: Don’t get your credit score from anywhere else except They have real scores here, not the fako crap that many sites give you. These are the real deal.

See How Lenders See Your FICO Score

You Need An Experienced Short Sale Agent!

From my blog here I’ve developed an extensive network of real estate agents that have short sale experience. If you’d like a referral, fill out the form below and I’ll have someone available in your area to help with your short sale ASAP.

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  • girlndebt

    Hey DK.

    I stopped paying my mortgage in June and closed on my short sale in October. I walked away from the closing table with nothing but happy the house didn’t go thru foreclosure.

    My credit report due to that short sale only reports the few lates and “settled”.

  • SavingDiva

    I’ve heard about short sales, but I was really unsure about what it was…thanks for the informative post!

  • Kristin

    My husband and i went through a short sale in october of 07 we stopped paying the mortgage in june of 07. our credit report reads 5 late payments on mortgage and states ” paid in full for amount less then owed” thinking it was a smart move, we paid off my husbands debt and so far it hasnt changed our credit score at all.

  • Charles

    On a pre-foreclosure sale I paid all of the back payments and did a payment plan with the mortgage company. The foreclosure never took place how can I get this off my credit report. Everthing else is paid as agreed. Actually what I am asking is what can I do to get the pre-foreclosure sale off my credit report.


  • Randall

    I just want to say that your web site has given me the answers I have been searching for all over the web. 30 minutes on your web site has totally changed the direction I was heading regarding my short sales efforts.

    I just wanted to say thank you for the information. I will sleep better tonight knowing a bit more about where i am heading.

    Thank you,

  • Nina

    We are still current on our mortgage payment but considering a short sale in the next few months. Our loan mod application was approved but lender increased our monthly payment to what we are currently paying that we cannot afford. We are thinking to do a short sale instead but after reading your posts, it seems not so easy as we thought but a better option than foreclosure. We are now confused if we should opt to going back to renting or buying a home on short sale which almost makes us pay the same monthly dues. Also how do leasing companies, apartments deal with a situation like ours? Haven’t missed a payment but about to sell the property, can we still find a place to rent because our credit history will not show a delinquency yet? I hope someone can give light to this.Thanks

  • girlndebt


    We did just that. We went and did an apartment application while our house was listed and our credit was still good. Even when we started missing payments, the lender did not report it right away. Once you wait and they report it, it is a little harder to get a place but not impossible. You may need to put more of a deposit down, etc and some utility companies will make you put bigger deposits down as well.

    Good luck to ya!

  • Brenda

    We just put our house on the market as a short sale. Many people have stopped by to take a look and it seems like it will sell easily. My husband has not been working and we can’t manage the morgage payment any more. There are several questions and I hope you could help me with them.
    1) Since the houses are now up to 50% less than what we owe on it, could we reason with the bank and have them lower our loan amount?
    2) If we do go with the Short Sale, how much time do we have to wait untill we could purchase another home?
    3) How many years will it affect our credit?
    3) Does the bank realy prefer to sell the house for 250,000 less than what we owe than to reason with the person in the home already?

  • Samuel

    Hi I had a question and wanted to see if anyone can help me with this one. I currently own an investment property that is free and clear (no mortgage)…Thanks to grandpa Eddie. I had recently purchased a home of my own and Im having some financial problems and considering a short sale. My main question is if the lender agrees to the short sale, can they take or put a lien on the property i inherited? If so, any suggestions on how i can protect the property?

  • Johnny

    Pay your bills, and sell your house short. You think it is a good idea to stop paying your bills and walk? Hope all your credit is ruined. The economy is is bad shape because idiots just decide they don’t want to pay your bills. Then cry for the govt to help.

  • Bryan Silva

    I am seriously considering a short sale. I have recently lost my job in Massachusetts (the state of my primary residence) and accepted a job in California. My home is not worth what it was 2 years ago when I bought it. I am current on my payments and have been working hard to build my credit score over the past few years. The reoccurring theme I keep reading as I research short sales is that the lender will not even consider it when you are current on your payments. This is surprising to me. Why if I can make payments should I decide not to? I cannot afford to make up the difference of what the house is worth to what is owed, but it seams crazy to me to stop making payments and fuel the fire of this bad economy. I have been thinking about renting the property, but my current mortgage is far higher than what I can charge in rent so I would be stretched too thin financially to deal with the unknown, such as a renter damaging the property, or the roof needing repaired. I dont know what is the best thing for me to do. Now I dont think I will be buying a home where I accepted the job because the prices are WAY to high for me out here, but my biggest concern is damaging my credit.

  • Bryan Silva

    Also what impact did The Mortgage Forgiveness Debt Relief Act of 2007 have on protecting those of us considering short sales?

  • Holly

    Maybe those suffering from the crash in the market are not the ones to blame. Many people should not have taken or been given these jumbo loans, they did not qualify, but thought if they did not buy now they would be out of luck. Turns out that the luck ran out anyhow. With that said, ecconomy is bad and people are working their butts off to pay for homes that may not ever be valued at what they owe. A negative mean attitude does not help (I am saying that to an earlier post). With that said, every loan company is different, but commonly,you have to talk to loss mitigation or you will get the run-a-round. In some cases you do not have to be late to short sale, you just hsve to provide proof of you situation. Remember too, that currently if you so sell your house for under what it is worth, you will not have to claim the forgiveness as income on your taxes, which makes it more workable (part of the economic stimulus). As this site says it will hurt you credit, but not as bad as a foreclosure.

  • bob in Pennsylviana

    Hi I’m in a very difficult problem I’m now going through a foreclosure. my wife and i are getting a divorce she will not sign off the house nor work with me on a short sale. We only bought the house 2 yrs ago been separated one yr. I lived in the house till i was not able to make the payments any more because my wife was granted alimony. I just now got the alimony reduced to where i could make the payments but I’m 7 months behind the bank wants all that is behind to come current i can not afford that. So i decided to go with a short sale but she does not because she wants to hurt my credit. She is living with her grandmother till she can inherit the house she don’t care about her credit but i care about mine. so if anyone has anything to say or give me an answer thank you

  • Bruno

    Will the “pre-foreclosure in redemption” in the credit report/score report be there forever or just only a few years?

    I’m asking this because so far my credit was great and would not like to have those remarks on my credit.


  • Sam

    I’ve made every mortgage payment faithfully for the entirety of the loan…three years and five months. Lenders were giving away loans to unqualified people back then, but I’m not included in that lot. Now, I’m being moved by the military, and I need to sell my house. But DUE TO FORECLOSURES, the assessed value of my house is down. At the time of the sale, I will lose nearly $23,000. Simply put, I am paying for the bad decisions that lenders made. I have to get a LOAN to SELL my house. Thanks a bunch, mortgage companies! You’re the best!

  • Juan

    Definitely loooking into a short sell. But looks like the lender will need documents as to why you are short selling or cannot afford payments. So, what stops the lender from taking all your assests to cover some of the loss on the mortgage? Can a lender force you to take all your savings, stocks, etc. to pay as much of the debt possible? And where can I find more info on the tax forgiveness?

  • Maria Cavella

    In Dec 07 the mortgage act of 07 passed that protects those whole lose their homes to a short sale. If you occupied the home as your primary residence you are a candidate. Also the IRS has a new form the Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Form 982. This came out in Feb of 08. Take this to your CPA at tax time. Having a good realtor, CPA and talking with a real estate attorney is a good idea to.

  • LeavingFL

    My husbands job is ending in Sept, we have a job offer in another state and must move by that time. We have opted on a short sale because we are unable to sell our house based on the market. We have not missed any payments at all. However by the information I have been reading a short sale will not be considered if we are current, so are we just to not continue to make payments at all? What will the late payment due to my credit along with teh short sale reporting?

    I want to be able to rent a home in the other state we are going to how will that be possible if my credit is ruined?

  • Bryan Silva


    I am in the same situation and hope someone can answer those same questions.

  • Nichols

    I am also considering the short sale process. We purchased in 2006 and now our property has negative equity (aprox. $80K to $100K). Part of the negative equity is that the lenders are pricing the foreclosed properties too low…they are causing a domino effect…more homeowners wanting to short sale!…

    We have always made payments on time and have great credit scores. I am wondering how long will I be able to purchase again with a short sale being on our credit report? I would like to take advantage of the new market prices too. Lenders should be willing to negotiate with the current home seller to lower the loan amount to the new market prices that we are now seeing and write off the difference…. this market is just a big headache :-(

  • cg

    Just because you have negative equity would not be a good reason to short sale your house. I believe that you need to show hardship. There are forms that every lender wants you to fill out. One is a financial worksheet, it must show that you cannot afford to keep your house. Some banks require a hardship letter also. This is obviously not a good time to sell unless your forced to. You can always have your credit fixed after a short sale. There are plenty of services out there cleaning up people’s credit, but there are alot of scammers too, you need to interview them and do your homework. I agree lenders should be willing to negotiate but they are not. That is a big problem with people still trying to buy, there is no one lending money except FHA. The lending guidelines are so strict right now, they just don’t want to lend the money. .

  • Shannon B

    Brian and leavingFL – did you ever get any answers and/or did you make any decisions about this? We are selling our home and will owe due to the market but haven’t fallen behind either. After reading this we will not be doing a short sale hopefully, and just taking out a private loan or putting it in our credit cards. I am unsure of how to approach the banks come closing time when they ant $$

  • cg

    Why would you put a loan on credit cards? The bank should do a private note for you. Credit Card interest has skyrocketed, not only that but they have decided they can charge anything they want even if you are making your payments on time. That’s another thing that should be looked into for predatory lending, taking advantage of the consumer.

    Who is your lender — there are a few out there that are easy. Countrywide is NOT one of them. Do you have a 1st and 2nd or just one mortgage. I would always try to short sale, as I said you can fix your credit later. How long will it take you to pay off the amount your house is deficient?
    This isn’t about what kind of person you are or a reflection of you personally, this has to be a business decision.

  • Shannon B

    CG – I appreciate you responding!

    Can we only get a private note if we do a short sale? I’d rather not have it affect my credit, even if I could get it fixed because I’d like to buy a house in the town we’re moving to.

    Our mortgage company is First Franklin – they don’t require us to fall behind in payments or wait 90 days or anything. I just don’t want to do the permanent thing if its going to keep us from owning a home again. We can afford our mortgage easy as it is we just can’t pay a mortgage and a rent for very long once we move in 2 months.

    The house appraised for $146k and we owe $137k so if we got a full price offer we’d only owe a few grand for realtor fees. If its a small amount I’d rather just get a loan or put it on credit and spend 6 months paying it off while owning a new house. If it gets to be $10 – 20k in the hole then we’d have to do a short sale.

    I just don’t understand what happens if we owe when closing time comes. Should I just find the money at closing or should I apply for a short sale when I get a low offer and tell the potential buyer that I have to start the process and wait for the bank to respond?

  • LeavingFL,

    I would advise 2 things before doing a short sale. Do not do it alone. 1st please make sure the realtor you’ve used has closed short sales before, they know how to work these type of loans. 2nd-please do a search on the internet to locate a company that helps in shortsales and can do this for you. We have one in FL and for a small fee (200) they work with the realtor after the offer is made on the house, gather all documentation from you (taxes, paychecks stubbs, hardship letter etc) and THEY work with the mortgage companies. You do not come to the table with any money. Once the lender agrees to the short sale no matter how much is left you don’t pay the rest, and according to the 2007 Fair Housing Act (not sure of exact name) You do not have to pay the difference in taxes. When you secure a buyer, or put on the market, u must disclose a short sale to any buyer as they have to agree to this before submitting a offer on the house. Currently we already have a buyer and are now working with the shortsale company and our mortgage to go the next step. I do not know how much it will effect my credit later as I have had different responses so we shall see. I am in a situation where we must move and we can’t afford 2 payments also.

    I would again look for a company in your area or state that handles short sales and recommend they refer you to a expierenced short sale realtor. This is what we did and it has helped.

  • cg

    Well the trick is to move and establish yourself before you let the house go. If you do a short sale or a deed in lieu you can restore your credit. i agree with LeavingFl, but I don’t care if you use a Fantastic Realtor or The Best Attorney if you are dealing with a lender that does NOT know what they are doing you are playing a waiting game. First Franklin is in bankruptcy, we are actually working on a file now with First Franklin. In order to do a short sale you have to show HARDSHIP. If you are supporting your home easily, then you don’t have hardship. If you move and now you cannot afford two homes. There is your hardship.

  • LeavingFL,

    If you move and now you cannot afford two homes. There is your hardship.

    And this is exactly what you indicate in your hardship letter, as cg stated. We have CountryWide and have heard good and bad things, so we shall see. I had suggested a company that is effective in short sales as they can help answer your questions and help you deal with your lender much better than trying alone.

    Good luck to all on this.

  • Shannon B

    LeavingFL – have you already moved and are currently supporting 2 mortgages? I have about 8 weeks before we leave and I’m wondering if I have to wait until I actually have the hardship or just prove that the hardship is coming very soon once I have to pay for 2 places…

  • LeavingFL,

    We have not left yet,we roughly have about the same time you have left but went ahead and got our hardship package ready (with the shortsale company) that is helping us, We already had it on the market and within less than a month (based on the price) we secured a buyer quickly. Everything was just submitted to the mortgage company..and we wait. However wether it’s finished or not by the time we leave in Sept,we are still going. We had to start now so we can be ready to move it everything is settled by then, if not then the hardship letter explains it enough. “We move, we sell if they don’t accept they can have the house”. I hate that it may get to that, but in the market that is out there now..what choice do I have, as you and others I won’t be able to pay for 2 houses.

    We are renting a house in the new area, will help build back up the credit if it’s dashed.

  • cg

    if you do not short sale..try to do a deed-in-lieu if it gets to the foreclosure point. Make a deal with the attorneys when you receive your demand letter, if it should get to that. The problem with only using a realtor and not an attorney is that the realtor can only take you so far. There is still some negotiation you can do after for yourself. A foreclosure is the worst! A deed in lieu is hard on the credit report but you can restore your credit.

  • Lisa

    What I want is an honest answer as to how bad a short sale is on a credit score. Our score is 580 because we are liquidated with debt. My husband has 3 more classes to finish his degree and it is pushing us to the point that we cannot afford our home. We are commutting and gas prices are killing us. There is a place we are looking at renting and it is only 250 dollars less than what we pay now, but is closer to save on gas. If we stretch and make it through then we probably could, but it will take longer for him to finish school. Also my husband has a stock plan from his previous employer that we don’t have access to until 2010 can they take the money?

  • girlndebt

    There really isn’t a simple answer to how the short sale will effect your credit. There are many things that factor into the equation:how long you go without paying the mortgage before the sale goes through-if the sale goes through and how the lender reports it. Will the short sale look better than a foreclosure…oh yeah but you may have other options. Have you contacted your lender and told them about your hardships? If you have and they were no help-take a different approach like”I am a foreclosure waiting to happen-are you sure there is nothing you can do for us?”. They may lower your payment even more than $250 a month. It is worth a shot.

    I only say this from my own personal experience. Last year we were going through a similar situation. At the time, lenders were not working with anyone and could care less about hardships. We ended up selling our house through a short sale last October. Our lender reported the lates and my credit report shows “settled”. My credit score did not drop too much BUT what ended up happening was my other creditors seen the activity and all of a sudden my rates were increased! That caused a whole other issue especially when we were too “liquidated with debt”. Now we got out of the house but facing other financial problems because of all of it. So if you are having trouble with your mortgage and are trying to save your credit you may want to read about the universal default clause. I wish I knew about all this stuff back then.

    Good luck to you.

    FYI some lenders will do a short sale even if you are not behind on your mortgage-depending on you and your situation. I know even back when I was doing mine-the lender was offering loans for the negative amount-some interest-free. That would probably help in a situation where you do not want a negative impact on your credit. Some people including myself did not go that route because of financial hardships but I know it is available.

  • Susan

    Am I reading that any short sale that we come up with will be denied if I can’t show sufficient “hardship”? Who decides what sufficient hardship is?I have seen more useful information on this website than anyplace else so far. Most people posting are or have been through what I am working with now. Also, CG, what exactly is this “demand” letter that you are refering to?

  • LeavingFL

    In this case the lender is the parties that will consider what “Hardship is’. My realtor (who only works with short sale clients) and a real estate attorney advised us to show any and all hardships or reasons why you can not continue to pay and consider a short sale, loss of finances, hospital or dr bills..banktrupcty, anything that shows you have a hardship.

    My time in moving is coming up and I have had 2 offers and now we play the waiting game of seeing if the Mortgage company will even agree, only time will tell again.

    It’s a sad thing when so many people are going through this type of thing and the only result they feel is panic at the situation….

  • Holly

    We are 4months into the process of a short sale. My husband and I experienced a sudden decrease of income and had to check our options. We are in the hole about 200k since we bought the house in 2005. We are in CA and it may be different in other states, but we have had 3-4 good offers on the house that are just sitting there at the bank not getting any kind of response. Our realtor says it is a “waiting game” and she is sending letters, calling and in other ways actively contacting the loan co. regarding the offers. One offer has been there since February and it is now June. I don’t even really get excited anymore when I hear there has been an offer because it is the bank we need to hear from. I wish I would have known about this company mentioned above that works with the bank on shortsale after the offer is in. I have not heard of anything like that in CA. Anyhow, we did have to get behind on our payment to get the banks attention to do the short sale, they would not even talk to us otherwise. We got a Notice of Default last month and if we will definitely deed in lou if the short sale does not go through. What a terrible thing so many are going through and it is so stressful for families. We are fighting and arguing over the stupidist things, and when we sit down to talk it usually comes back to this distressed sale we are doing, our credit that we worked so hard to uphold and our home that we payed massive amounts of money into over a 3 year period. I pray that we can make it through, and you all too. Also get help if the whole thing is effecting your life, happiness and marriage. Remember you are definitely not alone!

  • Don Lamerdin

    I am in total disbelief that we could be in this situation. After reading the other comments on this page, I realize, that I am not the only one in the world, that soaks my bed every night in anxiety-ridden sweat! I have a similar situation to all the previous people on this same site, and up to this point, have been in a horrible mental state, because of the side-effects, from this crisis. I have had my own business for many years, and it spiraled down to the point where I only have a few dollars coming in each month. My wife works full time, and can only come home on the weekends, because of the gas. I am doing the best I can to keep the hardship from my affecting my kids…but they are living this with us, and can see whats up! Anyone who says this is self-inflicted….well, I’ll reserve comment! Thanks to everyone else on this site who is stepping forward and telling your story. Maybe it will keep all the rest of us, who haven’t thought of suicide, from doing so, and get the Correct help we need to keep going ! Thank you Debt Kid..for all you have done! You have more information, than I could ever find…at double your age!

  • LeavingFL

    Don, I hope you were kidding with feeling like committing sucide, if so I advise you to seek help on dealing with the stress, and you as well Holly. We did and it helped. I don’t get excited either about offers because of the time frame after, we have had “offers” and only to pull out when they realize how long it takes. However I have no choice in the matter so I trudge on. I do get frustrated at times…

    Wonder if we can keep this as a support place?? LOL.

    I continue to wish EVERYONE luck and for anyone who has had success at the final end..feel free to share..we who are on the front end would
    love to hear your thoughts..and the outcomes.

  • http://none Nadia

    Hey debtkid, I want to do a shortsale of my house.
    i need to find an experienced person to help me with that.
    I bought my house last year cannot afford it any longer since I lost my job,
    Can you help me with good references or advice?

    thank you!

  • Megan S

    I moved 4 years ago to another state and have been trying to sell my previous house without any luck. I am now considering a short sale with a company called HomeAssure. Has anyone done business with them or have any comments.

  • Nichols

    To: Megan S
    I found a “rip off” complaint about HomeAssure:

  • Don Lamerdin

    Hello again from “East of Stockton California dream homes”
    To Leaving FL….I’m embarrassed to say no, I wasn’t kidding when the stress gives me thoughts of suicide…I have been in counceling throughout all this (over a year now) Like DK….I can no longer affort it…..duuh me….But the overwhelming urge to avoid those thoughts, are … children….I have spent years trying to be the “Mr Ward Cleaver” to them, (yeah right …I was a hippie in San Fran in the 60′s….;):( Anyhow…..this home out here, with its lake, and barn, and ranch house, which I have completly re-built ….(using my credit cards of course ) …and of course fully expecting to pay eem all off with the 2006 mtge price surge….all set on 11 acres…was our dream, after working for 30 years to get it. We have been here 8 years now, and paid 320K for it back then. In June 06 the neighbors sold for 1 million….so I figured we were all set. Little did I know what was coming over the hill. It has not been appraised yet but I heard through the grapevine that its value of 900K last year is now down in the range of 500K ! Sounds good …eh….not after they subtract the 850K I owe for business loans & credit cds !Just like all the rest of you guys-n-gals, we got hit with the San Andreas Bank fal…er..ah…should I say Default line….or lack there-of ! Now I know what it is like to be on the National Geographic film crew climbing Mt Everest…( or Rainer…for DK) …and looking out at everything soooo beautiful….and then….fall suddenly into a crevase! Yikes….true story…my brother was one of the rangers who found his best friend in one perished, in Yosemite. Anyway…..thats kind of the feeling right now…not to much of some useful info this time…but just wondering if anyone of you all out there……
    ok LeavingFL…..I’m really trying to keep my chin up, and hope everyone else out there doe’s too! I have to paint the palace this weekend, while working on my chapt 7 party…oh and my kids graduation….with the relatives (with $$) over here…and keep a smiley face on. All u have inspired my to do this ….and I thank everyone of you …+/- comments are all good ! But most of all to the Kid….who with out….nobody would have had the ba..s to have lit the fuse to the rocket ride we all want to go on…
    Thanks for my 1 cent more

  • LeavingFL

    Don…I think that you posting how you feel is helpful and I apologize if I offended you by my suggestions…I do understand the stress and that it can cause. Believe me….as you can tell. You are not alone at all.

    We did the refiance on the ARM rates that sounded so good a few years ago and did some upgrades to hour home and figured all would work. 2 years ago I could of pockedt 30k on my house if I sold it (bought in 2003 @150) and 2 years ago worth 280. Now we are lucky if it’s worth 200 etc…But I stil owe 240 because of refiancing home lone and equity lone into each other….etc..etc.etc.

    So..heres a rope..and hang on while we all swing from it, together.
    I promise I am not this freaking postive all the time..:) There are days I screaming into my freaking pillow.

  • Don Lamerdin more thing ……how come none-a – u ….with all we all have been through…..could think of the fact….that
    today is FRIDAY THE 13TH
    Jest kiddin….good day for shortsailing……away

  • Don Lamerdin

    Thanks LeavingFL..
    I know…the momentary smile must be from the Benydryl on ice, cause it is 108 here today…I understand where yer coming from…thats what I did….2 Eq lines , and a dozen cards….duuuh me….but the thing is……my pillow doesn’t muffle sound anymore, cause I have sweated it flat… hmmmm maybe I’ll just go kick a banker or 2 =)
    Bye for now

  • JennMS

    so i read thru every comment on this page and havent figured out if i feel more stressed, or more relaxed. i love all of Don’s comments, they kept me laughing…. ok so my situation may not be crazy yet. my husband and i are a very young couple, 25 and 26. we purchased our townhome just before the market crashed… of course! thats my luck, but anyway. purchased for 172k and could maybe get 99 for it now. we owe 158k and in the past 2 years had a suprise baby…we already had 2, baby made 3, and we have more than outgrown this place.

    we are current and even early on our payments but it is a struggle…i wont be finished with school for another year so we have only 1 income at the moment.

    like so many others we got put into a 5 yr arm. stupid huh?? this was our first home and we know nothing. i feel we got taken advantage of totally! our best friends live next door and have a 30 yr mortgage and only pay $100 more than us per month… how did that happen??? we had similar credit scores and they put NO money down. meanwhile we laid down our $14000 life savings! anyway thats besides the point… recently were thinking of doing a short sale because when the arm becomes mature in 2.5 yrs we will be wayyyyy past needing a bigger place and the prices keep dropping. BUT we want to be able to buy a new house in a year or 2 after saving up some money by renting one of hs parents houses for a meesily $600 per month.

    does anyone out there think a shortsale is for us given the circumstances… we could definitly prove hardship even though we are current on payments. OR are there any other ideas we could try?? my family needs a bigger home and we are losing money by the day in this market and on the intrest only arm im in.

    read this and help!!! i know it was a wayyyy long story :)

  • cg

    Absolutely! You are a great candidate for a short sale. Your certainly can prove hardship You have nothing to lose! Who is your lender? The only hitch is getting a buyer that is willing to hang in there for 60-90 days. I would only list your property with someone who is doing shortsales in your area. If you work with agents that know what they are doing it goes alot smoother.

  • JennMS

    we have 138k through Aurora Loan Services and another 20k through Citi mortgage.

  • Mellissa

    I am exactly the same as JennMS! I am also thinking about short sales, though my credit score is like 726..will it hurt me alot since my husband has NO credit..i am the only one that has the credit. I would rather find an agent then to do it myself…any suggestions on who? i live in broward county florida…thanxx

  • girlndebt


    We are neighbors, lol. I live in South Fla too! I can’t recommend anyone because our agent…”the short sale expert” that had an awesome proven track record lacked communication skills and left us to figure it out ourselves. He listed our house, after that-we never did see the guy again. When he was trying to get our business, he told us all about short sales and I took in all the information I could. He listed the house and we did everything else…I mean EVERYTHING! It is amazing what you learn when you are put in these desperate situations. So I guess I can tell you who NOT to use in our area. lol

    I had a very high score too and the mortgage was in my name only. If you stop paying your mortgage to do a short sale, yes your credit will suffer but not as bad as if you get a foreclosure. Where you and I live is ranked one of the highest in foreclosures even doing a short sale is becoming hard to do but it can be done. Just please please please find an agent that knows what they are doing when it comes down to doing a short sale. We had a friend who is a Realtor in Broward County and when we called her to inquire about a short sale-she had no clue about it. Now months later-we seen her ad and she advertises that she is a “short sale specialist”. I guess she took the course and became a SPECIALIST. What a joke. There are some very good agents out there you just gotta find the right one.

    I wish you luck!

    P.S. I have been reading the comments on this post everyday and I can only say how my heart sinks when I read what so many of you are going through. All I can say is…when it is all over-you will have so much relief! We did. My short sale was a success but unfortunately it came too late and we have debt problems because of it. But, we got through the whole house nightmare and if we can get through that-we can get through anything! So can you.

  • JennMS

    hi melissa and girlndebt, i am also in FL, tampa to be exact.

    on monday i am going to call my mortgage companies and see if they can restructure my loan… maybe put us in a 30 yr mortgage and possibly lower the amount we owe, as i have read on some other sites that its possible they may do that for people to save themselves the lost money through forclosure or short sale. if they will do that i will consider renting the townhouse out, but will still lose about 700-1000 dollars a month.

    otherwise i will still be looking on doing a shortsale. i just really dont want to ruin our credit… the whole point is that we want to buy a BIGGER and better home that suits our family. with damaged credit we couldnt do that.
    i will be on here daily, reading all the stories, and will tell you guys what the mortgage company says. :)

  • cg

    Aurora does short sales. So will Citi but you have to definitely prove hardship it sounds like you have a good chance. Hurry and list your house though. You folks cannot get this done without listing your house. For those of you that have one mortgage… you are in a lot better situation.

    Most lenders will NOT do anything unless you are late… sorry to be the one to tell you that. If any of you think that you are going to do this without your credit being dinged, marred or taking some kind of hit then you are kidding yourselves. But it is not the same as foreclosure or bankruptcy, there are a few good companies out there that are tenacious and can actually clean up your credit, after the short sale is done, but again do your homework.

    This has to be a business decision for you and your family. If you purchased or refinanced in the last 4 years then you are in the same situation as the rest of us. (JennMS) If you can afford your home and are looking to upgrade but your value is just not there in the property you have, then yes you should restructure your loan and make that an investment property. But you are definitely not in the same situation as alot of people who can’t afford their homes at all.

    For any of you that are using your charge cards to live off of to keep your homes…bad move. Do not trade CASH for your CREDIT.

    Countrywide now has a program for Modifications it costs $499 to do them, but it has to be a Countrywide loan — they will give Interest Only for Five Years Low Interest Rate. If they are just the servicer of the loan you don’t qualify. You won’t know unless you call your lender and find out if they have anything available. If they don’t, then come back on here and tell us they don’t. Doing NOTHING will not make your situations any better. If you want a loan modification, when you call your bank — tell them you are looking to do a LOAN MODIFICATION…don’t stop until they get you to the right department.

    If you list your property with an agent — DO NOT LIST FOR MORE THAN SIX MONTHS .. do not get locked in with an agent if you do not know if they are good or not. They all try to get you to list for one year. One thing I have learned in all this.. everything is negotiable.

    There are other options out there — but they cost money.

    I also live in Broward — where are you located?

  • Lisa

    Thank you girlndebt for your comments has anyone else fell a victim to the universal default clause. That kind of freaks me out. What if the mortgage company sues us is that common? How hard is it for them to take our pensions away? We cannot get the money until maturity can they take it when we can get it?

    I am worried about ruining my credit. Who would be a good person to talk to about finding out if this is a good option for our situation? The tax preparer, a lawyer, my pastor at church, the church treasurer, listen to the mortgage broker. How high is gas going to go?

  • girlndebt

    Wonderful advice CG! What are the odds of many of us not just posting from the same state but from the same County? That is crazy. I live in NW Broward (Tamarac/Coral Springs area). I think some people here got caught up in the ARM mess but most including me got the shocker from the insurance and taxes that crept up on us! Yes, you budget for those things but you never expect them to triple so fast.

    And the best advice was not to put this debt on your credit cards! That’s what we ended up doing and well, that is why I am “girlndebt”. 1 year ago, I had perfect credit and did not want to ruin it and did what I had to do to make sure everything got paid. I ended up putting most of it on credit cards. Including the home repairs to get the house sold. Once the house was sold, we were left with high debt and the minimums alone were too much. We wanted to do the right thing and get it paid off. The search was on for second jobs, more income-we sold nearly everything and couldn’t make a dent in the debt. Now with the economy the way it is and gas prices soaring, my credit seems to be the last thing on my mind now. For us it is about survival and we learned from all this really. We have consulted with an attorney and are in the process of filing BK. Gosh, just 1 year ago I was one of those people so worried about damaging my credit. It is amazing how things change so quickly!

    Lisa-talk to anyone you can. Some people are going to have their comments and you are going to hear some things you don’t want to. What is important is that you feel comfortable with the decision you make.

  • LeavingFL


    I also live in Tampa, let us know what the mortgage company says.
    For those of you who have already gone through the short sale process…what does one say to the Mortg company when they start calling because you are behind. Our shortsale package just arrived to them and I doubt they have had time to assign it in the Mitigation dept yet. We are almost 2 months behind now. Is it ok to go ahead and tell the person on the phone or wait? I know it’s just the customerservice collection side calling to remind us…so I don’t want to give to much information until I know the right person has my detail.

    Sounds like alot of FL people go caught up in the ARM as well.

  • cg

    THIS IS IMPORTANT! When the lender calls — it is the Debt Collection Department calling. They have NO CLUE what’s going on in Loss Mitigation Dept. The Debt Collection Dept is there to collect money. You need to tell them you are working on doing a short sale and are working with Loss Mitigation Dept. and that you are doing everything in your power to get out of this mess. They will still ask you — Can you make a payment? “No not at this time!”

  • LeavingFL

    Thanks cg this is exactly what I though,they should be calling tomorrow @9:00am like clock work….lol

  • JennMS

    Thanks cg for all the helpful info. once my husband gets in tomorrow hes going to call the mortgage company. yes we can afford the payment… for now, but for how long? last year our total payment was $1300 a month. No one mentioned it would hit $1700 this year. then when the ARM matures in 2.5 years where will it balloon to? as i said my best friend and neighbor has the same townhouse, same credit, etc but has a 30 yr mortgage and her payment is only $100 more than mine! my first step is to see if they will restructure the loan for us, maybe take some of the principal off…but i highly doubt that one. just an idea i got off someone from one of these sites.

  • cg

    You are starting exactly where you need to be… Get the loan restructured. Who is your lender?
    Keep us informed no matter what direction it goes. We are all here to support you.
    Good Luck!

  • Mellissa

    Thanx for all the comments neighbors! I actually called Hope in regards to my mortgage and they did help me a little..meaning..they took all my information and was supposedly sending it to my lender, Option One. I called the loss mitigation department, but never received a call back from them. That’s why I’m looking into the short sale theory. I also asked a friend who is an accountant and he said that when a short sale does go through, whatever amount you owe to the bank turns to be an income that you need to report when you pay taxes the next year. I don’t know if that’s a good thing or a bad thing. My mom is actually trying to do a short sale also with a company. I’m gonna see what happens with her case before I even start the process. If it turns out good though..i will definitely put their names on here for all the south florida peoples!

  • Mellissa

    I’m in Deerfield Beach by the way. I’m not behind on my payments at all right now and really don’t intend to either honestly… I just don’t want to fork out so much for my mortgage ($1400 not including maintenance or ANYTHING…no tax, no insurance ) which rounds up to be like $2000! And i only have a condo! Also..if i do make my home an investment home and try to buy another home…would lenders actually approve me? I’m like JennMS, i want to get a bigger home also, but just not sure how to go about it.

  • cg

    Tell your accountant to keep up with what is going on…..
    Mortgage Forgiveness Debt Relief Act,,id=179414,00.html

    No tax consequence for the next 2 years on homestead property.

  • JennMS

    cg, we have aurora for 138k and citi for another 20k.

  • JennMS

    cg and melissa,

    so here is an update of what i got from my mortgage company Aurora today… remember, i owe them 138k and another 20k to Citi but i havent called them yet.

    talked to a girl at aurora today and gave her the whole run down on my situation, exactly as i said it here to you guys online. i never even mentioned a shortsale, i was going on and on about restructuring my loan. she said i would have to send in all sorts of info to get the restructure approved. things that included a hardship letter, bank statements, taxes, bills, paychecks, etc. i was told that they would get me into a 30 yr fixed rate upon approval. they wouldnt take any off my principal balance though, which is my problem… we would then still own a townhome that is only worth half of what we are paying on it… no help.

    then she ended up transfering me to the lady that would be the one who would authorize the loan restructure. she told me i should do a short sale! i told her we are not behind on payments, and tend to be 2 weeks ahead, etc but that we are concerned about our 5 yr ARM and the homes continuing decline in value, and our growing family issues. she said all options will hurt your credit… even restructuring the loan! so i said, if they will both hurt my credit then why would i force my family to stay in these cramped quarters and lose a ton of money at the same time? she said thats exactly why she recommends the shortsale.

    she didnt know how many points would be taken off my credit exactly, which has always been my main question. she said she would send me the short sale packet out immediately but do not fill it out until the realestate agent has an offer from a buyer. we would then send it in and they guarantee your answer in 20-30 days. they even send a guy out to inspect the home and make sure the offer is fair and market value. so i said great, send it out now.

    then she patched me through to the loss mitigation department who confirmed that i do not have to be delinquent on my payments to get a short sale. i then asked him how much it would affect my credit and he said he honestly didnt know but he thought maybe 150 points. i asked if that was on a person who was or was not delinquent. he said he didnt know but that i could call a credit reporting agency and ask them. he said aurora would report it as,”loan paid in full for less than owed”.

    i then called experian who told me that they dont know how it would affect my credit as they are not a counseling service… whatever that means. but they did put me intouch with which is the national credit couseling service that will answer questions for free but they were closed when i called so i will try again tomorrow.

    i also got ahold of a highly recommended real estate agent who only works with short sales and hes supposed to call me back tomorrow… we shall see.

    so to recap- you do not have to be delinquent on payments to do a short sale… atleast with my mortgage company. how badly this is going to hurt my credit? i dont know yet. but i will find out!

  • cg

    Ok well doing a short sale entails both lenders. You need to get Citi to agree also. Citi will only end up with $1K to 3K depending on what Aurora allows to give them. Only owing $20,000 is a good thing. What do you think your house is worth?

  • LeavingFL

    JenMs-great they gave you that information, however maybe each mortgage company is different, when we talked to ours (Countrywide) they informed our agent that they would not consider a short sale if we were not behind in our payments, as why would they need to because we were paying. I have even spoke to real estate attorneys and previous mortgage lenders who have confirmed the same thing. I am not saying don’t pay I am just saying what I have been told.

    As far as the credit reporting I am finding different answers.
    1. It depends on when and how often your creditor reports your deliquent payments, once a month, every 6 months etc…
    2. I do believe a short sale can lower your credit standing from 50-100 points where as a forecloser can be much higher.(200??)

    I have been reading alot of information on the fico (credit scores) forums.
    I think it all depends on your lender etc???

    My husband and I have great credit but as like others here we can’t afford 2 house payments when we move. Think gosh this loan is in my name only so he can still qualify for a mortgage.

    Currently Countrywide has not even assigned my shortsale to a mitigation specialist…but the collection dept called again about my “no payment” and I informed them what was happening and they noted the acct and said they would not call every day but once a week and would look to see when it was assigned. They did not ask me for a payment at all…

    This has been very helpful for everyone to post their responses.

  • Susan Milner

    Since we do not have a concise answer to ‘how will a short sale affect my credit’ I stumbled upon this blog in the hope of finding some ‘real life example cases’.

    It will certainly depend on many factors but I certainly think for many a short sale is a much better option than a foreclosure. An attorney is the best person to ask. Everyone’s situation is different and just because one person had a good/bad experience doesn’t mean yours will be the same.

    If you are in SW Florida we can help you sell your house. We can also give you names/#s of attorneys to consult with for answers in regards to other options – deed in lieu, bankruptcy, foreclosure.

    The best advice I have is to research as much as possible then make a decision. Waiting months and months is not going to make things easier for you. It is a stressful time in your life and handling these things sooner than later will alleviate that stress much quicker.

    Good luck. Feel free to visit my website(s) for more information. We are real estate professionals with experience in selling homes as short sales. We always advise everyone to consult with their attorney and tax accountant for their specific advise.

  • Lisa

    I decided to call my mortgage company on Friday because we decided a couple of months ago to do a short sale, called a Realtor she said that we have to be deficient on our payment to do a short sale to be in default so since I had already paid my house payment for the month of May we wouldn’t be in default until June 16th. So we put our house on the market and got three offers. Filled out the packet from the bank and it was like June 12th and we were going to do this, but I decided not to because my husband has a pension that would pay the differance for our house, but it dosen’t come due until 2010 and I am affraid that they can take this money if I do the shortsale and if we are deficient on our loan means we have to move now and if the shortsale dosen’t go through then we will be moved with a lease and facing foreclosure and then have to move back.

    So as I said I called my mortgage company today and they said that I don’t have to have a late payment to qualify for a short sale. I can qualify based on my income vs. my expenses. She said that I didn’t qualify in April because my deficit was too high. I found out that through my company your monthly expenses have to fit into their formula. Your deficit cannot be too big (which is the differance between your income and expenses). So when I submitted income in April I made 2,500 and my expenses were 3,900 then you don’t qualify. So, I redid my expenses over the phone and lowered them like for gas I said that I pay 200 a month but really I pay about 900 because we drive over a thousand miles a week (which is a good reason why we want to move). So I got it in the range they wanted it and now my application is in review. I can choose to lower my monthly payment or do a short sale based off the same qualification packet.

  • Lisa

    Help.. We cannot afford the second home we purchased in 05 any more because our financial situation has changed and renting it at half our monthly pmt is not an option. We have an approved short sale from the bank for 140 k with a buyer. Our purchase price was 360 K in 2005. ( the hardships and all docs have been completed) I was told by an attorney that we will be taxed on the difference of $ 220 K from the IRS which equates to $ 90 K in taxes because it shows as income from the IRS. That also sounds like financial suicide. We cannot afford to pay that in taxes. He said that it is better to let the bank take the home by a DIL or foreclosing on it because the bank will not send a 1099 on a DIL. He said that the banks have so many DIL’s and foreclosures that they rarely go after you in less than 1 % of these cases. I am very confused and I need your help. What is the best option for us? How bad will our credit score be damaged?

  • Jeff

    First, you all have been so helpful! Thank you for taking the time to make these comments and to share your experiences.

    I am going through a similar situation as a few of you. Here are my facts…

    - Bought my place (primary residence) in Northern CA for $655k in 2005
    - Could probably sell it for $525 – $550k today
    - I am 100% financed with 2 loans: 1st is with ING for $500k; 2nd is with Chase for $155k
    - I can currently afford the monthly payments and have kept current on both mortgages, but my wife and I will be moving out of state soon (most likely in January). Once we move, I am sure that we will no longer be able to afford the NorCal home in addition to our new home after the move.
    - I have enough money saved up in my retirement and other accounts to cover the difference, but I obviously do not want to give up that big of a chunk of my life savings.

    Based on your experiences, it sounds like the following is the best course of action:

    1) Find an experienced realtor who has dealt with short sales
    2) Have them contact both ING and Chase to begin short sale discussions
    3) List my property immediately at a market-competitive price but with the goal of getting an offer as soon as possible (through aggressive price reductions if necessary)
    4) Continue following up with ING and Chase while the house is on the market and after we have an offer. If we get no response, begin defaulting on our monthly payments (for whichever lender is not responding) to get their attention. Since our credit will be affected either way, the goal is to avoid a foreclosure; a few extra late payments will only be icing on the short-sale-credit-reducing cake.
    5) It is highly possible that one or both lenders will not currently agree to the short sale since my income still exceeds my expenses by a decent margin (especially Chase – the second lender – since they will stand to lose the most money by selling the house short). It is worth noting here that even though the sale price would satisty all of ING’s loan, if we can’t get Chase to agree the entire deal will fall apart.
    6) If I cannot get both lenders to agree, my only option would be to demonstrate a hardship by quitting my job and moving (and therefore move the income to expense ratio to a point that the lenders deem sufficient for a short sale).

    So my questions are…

    1) Did I miss anything above?
    2) Assuming I cannot get both lenders to agree to a short sale, how likely will it be that both lenders STILL do not agree to a short sale after I quit my job and move?
    3) If they still do not agree, would my only options be to proceed with a foreclosure, pull money from my life savings or file for bankruptcy (and could I even file for bankrupcy given my savings? should I in that situation?).
    4) Assuming I can sell my home for $550k (remember, my first mortgage with ING is for $500k and my second with Chase is for $155k for a total of $655k), is it possible to sell my home and use the money to completely pay off ING and partially pay off Chase WITHOUT negotiating a short sale? If so, could Chase come after me for the difference now or in the future? What would they have access to (tax favored accounts like 401k and IRA?)?

    Thanks for reading, and please let me know your thoughts!

  • debt kid

    Hi everyone, DebtKid here. Just a quick note that if you need to find an agent with short sale experience, please fill out the short form located:

    I’ve been referring people for the last 6 months, and all have been very pleased with their real estate agent. Experience with short sales is very important, you don’t want just some random agent.

    Thanks, and good luck,


  • carlos

    I would like someone to notify me regarding a possible short sale in the state of arizona.

  • mr. ruelas

    i took out 38,000. from my residence for a down payment on a secound house. the other home debt is 144,000. its been around three years now and up till now i havent missed a payment. the problem is the monthly payment of 1,300.00 minus 750.00 from (hope they stay) renters along with all my other bills are more than i make monthly. i have made the payments because of yearly help of income tax refund. this year its going faster than before. my question is , Will i lose my own residence that i have only 10 years left to pay for if i stop all payments of the secound residence in order to try and save myself and my family of five . i owe gmac mort. 111,000. and golden 1 bank 33,000.

  • mellissa

    hello you guys…

    i have a new issue to discuss and wanted to know if anybody can give me some input….

    i was thinking about a short sale on my home, but before i do that while i’m still current, should i try and buy a second home first and then short sale my first one? since i already will have a home i won’t be as worried about my credit score since i already have credit cards…what do you guys think? is that fraud?

  • Susan

    Short Sales can be an answer, although they admittedly take quite a long time to process and are not guaranteed for buyers.

  • JennMS

    hey everyone, i have an update on my situation for ya! but first…

    Melissa- if you can afford a second home and can get a loan then yes, id do that. my realtor actually told me that would be an option, however with our incomes that didnt work out for us. plus, you might have a hard time convincing the banks that you cant afford the first home if you just had to jump thru loops to prove you could afford both with the second loan.

    ok so for me… we listed our place and got an offer within 2 weeks which is fabulous. we submitted the paperwork to the first and second lenders and one of them processed fast and sent out an appraisal company to be sure our offer was fair and have agreed to the price already. however, citi mortgage, the one we only owe about 20k to is taking longer. they say its taking so long because so many people are losing their homes. its been about 4 weeks since we submitted everything and they assure us that they will assign someone to our case in the next few days to a couple weeks. i wish they’d hurry up we want to get out of here!

    we are still current and even a bit ahead on the payments so whenever we run our credit again i will let you all know the effect this had on it. we are going to rent a place for the next year or so and then try to buy again when the market hits rock bottom.

    i will continue to update you all as new things happen. good luck everyone!!

  • Joey

    I have some questions about short sales. I bought my home in Minneapolis a few years ago during the time in which the market was high. Unfortunately the market in that geographical location has taken a slide for the worst. It has depreciated so much that no one can get anything out of their home. I have had a medical condition where I have been released from my job. Now without an income I am no longer able to make any payments. I have a short sale pending. Will the banks make any effort to speed up the process knowing that I have lost my job due to medical reasons? My mortgage holder is a bank that is now in bankruptcy. I would think that they would want to get it off their shoulders. Any advice would be great.

  • Mellissa I tried to see if I can get approved for another mortgage, but nope..can’t…income doesn’t qualify. So i guess my only option is to see what the mortgage companies can offer in regards to modifying loans!

  • Holly

    Just an update. I made an earlier post around June, we have had our home on the market for short sale since February. Just a little over a month ago we were approved–meaning we got an asking price and a negotiator who will look at any offers. Our other offers just kind of went away since it took so long. It is actually better, I think, for a potential buyer to go for the REO. There are so many, but they are not kept up. Anyhow, even with the negotiator it is still a waiting game and we have not heard a thing about our recent offer in the two weeks since it has been submitted. I have to say that this entire process is discouraging. I am even more discouraged because it looks like this government buy out thing may not benefit those who are attempting short sale. Well we will see. I am not to clear on what they are attempting to do other than buy a whole lot of distressed homes off of the sinking banks and try to sell them out to places that are going to have a hell of a time qualifying people for loans. Am I off? Well I do wish you all luck, and I did see a post here with somebody wondering if the bank would speed things up because of a medical condition and sadly, I do not think so, but hang in there because if you are already in distress who knows maybe the gov is going to try to keep us in our homes rather than have massive amounts of empty homes to try to fill. Most of us have earning power, just not enough to fulfill the jumbo loans that we probably should not have gotten. I sure have learned a lesson from all of this and feel quite foolish, I hate making a contribution to the chaos, but there really is nothing–short of–working like a slave for a home that may not reach the value I payed in my lifetime–else I can do. Take good care. Holly

  • BenY

    I have an interesting situation… I am in the military with a security clearance. I am current on my payments, but I am not going to be able to stay current for long and both my checking accounts are at zero (or lower). I am interested in short selling (or just selling in general) my house in southern MN, but it is “worth” only 80k and I owe 98k. The biggest thing I have is I can’t have this causing negative affect on my security clearance for the military or I will loose my job! I haven’t been able to find anywhere that says if it will have a negative affect on my clearance. Does anyone know?!

  • Holly

    I am certain that there are special programs for military. I don’t know about clearance, hopefully somebody out there does. I know of one program for military where they cannot foreclose on a home for 10 months. I am almost done with a short sale. Communicate with your bank and try everything! I posted several times earlier on and it has not been fun. Long, drawn out, unorganized and finally the bank has looked at and accepted an offer, now we will go into escrow. Even the agents that think they know about Shortsale have never done so in such a crisis, nothing is ordinary. But, proof hear, almost, that it can be done. we bought our home for 480K it sold for 250K…..isnt that sad!

  • chatty

    I am so glad that I found this website. I have been so stressed out about our current situation. We have started the short sale process, but what scares me is how long it might take ? and there isn’t any thing you can do except keep your fingers crossed and hope for the best. My husband and I purchased a home in 2005 and had to out bid 5 other couples for the home we had to cash out our 401k’s and drain our savings to get it. Looking back on that it seems rediculous now .. We ended up getting a horrble loan( our fault for not being able to see the future?) We were told that it would be a great investment home for a rental property? and of course we agreed! our plan was to rent it for 2yrs and then get out with a 20% profit… well you all know the rest . We were not able to sell and the mortgage doubled and the rent is only paying half. So I am paying the bank $1,000.00 a month for somebody else to live in my house and I owe 40k more than it’s worth. It really stinks, we have had our house in short sale for 2 months and we have’nt even had a showing yet, is that normal? Our renters are moving out this month, and we will now have to pay $2,300 a month(there’s no way) I don’t want to go into forclosure!!! I guess we just have to get a real estate lawyer? I called Hope Now,I had heard that they can help with these situations. They told me that they couldn’t help me because it wasn’t my primary home? I guess with this economy you just have to loose everthing you worked for and start over ??? Sorry to vent but I guess it’s better than the alternatives?

  • Holly

    Don’t give up, just keep on trying to do the short-pay, ours lasted 10 months and we just went into escrow yesterday. We did have tons of showings which makes me wonder what kind of marketing your agent is doing or what area you are in–are other homes moving? We stopped paying and moved out as to have a better chance at selling the home. Also our Realtor had some prior experience with shortsale’s but nothing like trying to do one in this economy. There is a process to the whole thing and each bank is different which is why you can’t get clear answers from those not directly involved, but I do know that the banks are willing to work with people if you keep communication open.

  • girlndebt

    It has been 1 year since my “nightmare short sale” and I can tell you that it was no walk in the park. I know things like this aren’t always easy but I believe the whole process can go smoother if everyone involved is on the same page with each other.

    One word of advice: COMMUNICATION

    If you have gone through a short sale then you probably know what I am talking about. If you are going through one now, I wish you the best of luck! It may be a “rough ride” but once it is over-it will be a relief.

  • Sandy

    How does a bank remodify your loan & how can you qualify????

  • Sarah

    Holy crap, there are other people out there like us! :) We have a situation that isn’t as bad as some, but any advice would be welcomed! I read through what everyone had to say, and I don’t know where we fit into this all. My husband and I moved away from Grand Rapids, MI right after we got married for his job on the border of IN/MI. Thinking we were going to raise our family there, we bought a house at a great price in that area. It is in a very sloooowwww moving area, and presently anything over $50,000 isn’t selling. We decided a year and a half ago to move back home b/c we were due with our first baby any minute, and my husband was able to get a great job by our family (something we hadn’t been able to do 2 years before).

    OK, so the situation: We have had our house on the market for almost 1 1/2 yrs, and have been living with my parents in GR for that time (GETTING REALLY OLD). There is very limited action on our house due to the ares, and presently none at all. Our house is beautiful, it is priced extremely aggressive with several price reductions, and it is still getting no bites. We can’t move back (no jobs there), and we are at a loss as to what to do because we can’t handle things the way they are anymore. We’re beyond depressed about this, and at this point are definently going to take a loss of our home. So do we attempt a short sale, so do we just hang in there? My husband has a great income, we have great credit, but we can’t take much more of this and are not confident that our home is going to sell in this market. There are literally no houses except foreclosures moving in our area.

    Are there any other options out there? Would we be able to restructure our loan, or is that not even something for us? We currently owe $127,000ish and have the house priced at $130 (appraised much higher 3 years ago), so we are already going to be in the hole. My husband called the mortgage company a while back and they said that there is nothing that they could do for us except give us short sale papers. However, even with a short sale, you still need a buyer, and there are none unless I want to sell my home for under $50,000, which is not happeneing. With our car payments and such, we don’t dare do a second mortgage, and can’t really afford to take on an apartment on top of it all. What do we do?? We can’t afford mentally and physically to have our lives on hold forever!! We can’t stay in our current living situation and continue to keep our sanity. We don’t know what to do, and are literally falling apart over this all. Please help us!!! Thanks so much!

  • Stacy

    Wow, I wish I would have found this website sooner. We are done with the short sale but now I am dealing with the backlash of my credit being ruined. So, my question now is; Where do I go to make sure that my credit report states “pre-foreclosure in redemption’ or for it to read the number of late payments on mortgage and states ” paid in full for amount less then owed” or anything else on those lines.

  • girlndebt

    Sandy-call your lender and go over your options. You will be surprised at what may be offered to you. They may not offer anything but it is worth a shot.

    Sarah-you said exactly what I said when I found this site-holy crap! If I were you, I would also try to see what your lender can offer. Back before this mortgage mess, they weren’t so willing to work with people but now they are being a lot more helpful. They may be able to restructure your loan to make it more comfortable for you and your husband. Have you tried renting your house out? That may be an option for now until the market picks up…hopefully. I personally would try to hang on but not if it is too much on your family.

    Stacy-when you pull your credit report-you will see your mortgage info on there. It should say it next to your mortgage info. It may not report right away though.

    I just noticed-all your names started with an S-lol :)

    Good luck everyone!

  • Lori

    For those of you considering loan modification or short sales, have your real estate or mortgage broker contact Option Next. They expedite and facilitate the process and fully disclose all progress to the homeowners and agents. They really are working to revitalize the community and prevent foreclosures. Brokers still receive payment and the homeowner walks away with the absolute best possible outcome. for more information, http://www.optionnext.comor email [email protected].

  • La Nita Mitchell

    If your inability to pay the mortgage while your short sale is in progress mess up your credit rating even if the lenders are paying the investors until the process is completed.

  • Lanita mitchell

    How long are you still allowed to stay in your house after the short sale is completed?

  • Laurie

    Has anyone conducted a "short sale" in Texas? What is the liklihood that a lendor will come after you for the balance of the loan?

  • My

    Has anyone been though short sales on the property that was a secondary home? Will Lender do anything on my primary home? since my husband is the owner on the secondary home and my name is not on the secondary home?

  • mplsgrl2004

    Hey DebtKid, thanks for all of your information! I was wondering about the remaining balance on the loan after the short sale goes through. I live in MN and Wells Fargo told me that it’s a “myth” that the bank can come after you for that amount. I know people who have had to pay it, so now I’m worried that I’ll have to take out a huge loan after the sale goes through and wonder if it would be better to just foreclose. Please let me know if you know anything about this. Thanks!!

  • Susanna

    We own a home in WI and it has been on the market for 15 months now. We started at $450,000 and now we are at $315,000 which is less than we owe the bank, plus we have a second mortgage for another $12,500, that we are just paying a minimum amount on. We moved to Alaska and are renting a home for the same amount as our mortgage. We have cashed in both of our IRA’s and now have nothing in savings. We owe doctors for medical bills and are paying $100 per month to each of them. We actually qualify for a $400,000 loan but we don’t have a down payment of 20%. We are also trying to sell our 35 acre lake property. I feel like we are between a rock and a hard place. We have made all of our payments. But now our 2nd half of our property payment is due and we either skip a mortgage payment to pay it or borrow from our revolving second mortgage loan. We have started talking about a short sale on our house in WI because now if we sell, we will owe $38,000 including closing costs and will have to take loans out on our care and an unsecured loan on my husbands salary. It just seems like a short sale makes more sense! If we do a short sale, do we still have to pay the closing costs? How does it all work?

  • Susanna

    I email this address and the email came back as un able to deliver.

  • Amber

    My question is: can the bank take our tax return away before our short sale is approved? My husband is having our tax account delay filing for 2008 until our sale is approved so they can’t take our return. Is that true they can do that? We could sure use the money now.

  • Carlos Carus

    Well first, most of the time the buyer is going to pay the closing cost he the one getting a good deal on the property right. Really about the only thing the sellers down here in Miami Florida pay for is the title company just because some title companies do not know how to work short sale closings, so we has the seller like to control the process. First you have to get a buyer before you start the short sale process. Second drop the price down fast 5K every week until you’re about 10K below market value. After you get a buyer you then have to summit a package that your lender will provide you. It best to seek a realtor that works shorts sales this can take a lot of time out of you.

  • Carlos Carus

    That is not true they can only ask you for what you have in bank in form of cash as deficiency payment. Right when the bank aprove the short sale they will tell you the terms on how much they want from you,make sure to always get an attorny to read the offer once it comes back from the bank.

  • Frank

    Hi All,

    I have been reading a lot of the posts on here and it is actually scaring me from some of the outcomes however there seems to be some positive hope. I unfortunately had to file BK from robbing peter and paying paul with my credit cards. However, in doing so I was and still am trying to keep my house and the bank seems to be on board with this. It has by no means been an easy battle but I have so far managed to meet their requirements but things are getting more and more trying as time goes on. I am a two family, owner occupied home owner, and am contemplating a short sale because even after BK I find myself struggling to make ends meet. Looking back on everything I should not have been given a mortgage on this place and I am now in a really bad situation. The bank is supposedly in the process of modifying the loan but I don’t think they are going to come back with a figure that I can afford. Does anyone have any advice on what to do in the event they don’t? I am looking into short sale but don’t even know if that is an option at this point since the bank is working with me. Should I put it up for sale in the mean time while this is going on or just see where it goes? If anyone has any input please let me know. Greatfully yours, Frank.

  • Nathan Mikita

    We are considering a short sale or even foreclosure. Currently we have rented out our house because we cannot afford the mortgage payments. We have both a first and second combined that come to around $410k. I recently got laid off and things are getting really tuff. We live in a much smaller house now that we are renting and would like to stay here. Our house is rented out on a lease until November and we are in a lease on the place we currently live in for another 10 months. What should we do? Can we do a short sale without living in the home?

  • Ashley

    I am also so glad I found this website! I am in a situation where I need to move out of my townhouse but I owe more than it is worth. I have never been late with a payment and not behind, but am thinking of short selling just to get out of it. My main concern is what happens to the co-signer??

  • Dean Herbertz

    Hi Nathan, Before I go any further just let me state that I am not an attorney and that you should consult with a professional to answer any legal questions. I am however a real estate investor that specializes in short sale and over leveraged properties with a team of seasoned loss mitigation and negotiating professionals. We locate sellers who require our expertise and then work with realtors as our buyers agents. We give immediate offers on the property then negotiate with the bank to get an accepted offer. I ironically got into this business because I was a hard property investor that lost everything between 2006 and 2007 when the market ate all my equity. At the time I had never heard of a short sale and as such it cost me a lot regarding my credit. I accidentally ran into a Broker that suggested this course of action and I was able to get this accomplished on one property I had. So I know your frstration first hand. As far as your current personal situation is concerned it all depends on a few main factors, #1 It is irrelevant wether you are living in the home or not, What is relevant is the current status on your payments. Are you current or deliquent (have you recieved a Notice of deliquency ?) Foreclosure procededings generally start at 90 days past due. #2 Are you over leveraged on the home (you owe more then it is worth) #3 Do you have a difinitive hardship (which we must prove to the bank). If you are laid off with no income that is a good reason. So Nathan these are a few criteria regarding short sale, many people who proceed with a short sale have already vacated with the assumption that they would just let the property go back to the bank. This is more common then some may think. As far as what you should do, this is completly dependent on the questions I posed above. Not all properties meet all criteria for a short sale. Obviously if you had equity of any kind it would benefit you to find a cash buyer. In the current market this is not that easy unless you have room to negotiate on price. Foreclosure is absolutley the worst option..I know, and it should be avoided at all cost. One thing we do when negotiating with the banks is that we insist that there be no recourse to the seller for any deficencies in the future and we get this in writing. Many lenders will still issue a 1099 to you for the deficency amount which you would turn in with your taxes, the current code allows you to do this once on your personal property and be exempt from the amount. Again I am not an accountant either and you should consult one regarding tax implications.

  • Dean Herbertz

    Hi Ashley, if you are not deliquent you will not be able to short sale. My suggestion would be keep your credit intact, find someone to lease the house to until a time when the market may recover to swing your equity situation in a positive direction. If you are not able to manage the property yourself and there is room in the lease amount hire a property management firm, they generally charge between 8-10% of the gross rent. On the second part of your question anything negative regarding the credit used to obtain the loan will affect your co-signer as well. Good Luck…Dean

  • Dean Herbertz

    Hi Amber, wish I would have read this earlier. However this is not a Bankruptcy and no one is going to take money out of your account on a short sale for a deficeincy. The short sale package that went to the bank would have included all your financials, tax returns, bank statements and so on. The determination of the short sale is based on these items as well as a banks assesment of value..BPO. If there were a deficeincy the bank may come back and file a judgement for this at a later date. Besides the fact that they require your last 2 years returns anyway. It is also a good idea to have professional handle a short sale for you if you are not familiar with the requirements or the process. Either a realestate agent or an Investor like myself that specializes in these. Good luck to you…Dean

  • Dean Herbertz

    Hi Frank, this is a tough one. Obviously if you are adament (I am not a good speller so excuse any mistakes)on keeping your home and the bank is working with you and most importantly you can afford it then continue doing what you have done. However should the bank not come back with a modification you can afford you will have to make some tough choices. If you have enough equity to sell the home in the currrent market to cover the mortgage then by all means this would be your next recourse. Loan modifications are generally a temporary fix to a long term issue. I understand 100% what you are dealing with, I had a BK and lost 5 properties, do not however blame yourself. Banks like to say in ther ads how they are making 4% loans to people now who have been responsible…what a load of garbage. They were not responsible when they and many unsrcupulous Mortgage brokers made bad sub prime loans to millions of people who could not afford them. Read my reply below to Nathan for some answers to short sales. Let me know if I can answer any further questions. Good luck…Dean

  • Dean Herbertz

    Hi Susanna, first of all I specialize in Shortsales and Carlos is incorrect on a few counts. #1 The presumption in a short sale is that you have a proven hardship and are behind on your 1st mortgage. In this case the bank is approving a HUD 1 specifing the cost of the sale which comes out of the sale price approved. The seller niether pays closing costs nor receives any monies from the sale. #2 If you have equitable assets such as your 35 acer lake property then this will not get approved. The attitude of the bank would be liquidate your asset and pay us. Again there is not enough information listed here to determine whether or not you would qualify for a short sale or even if it is your best course of action. Should you have further questions feel free to e-mail me [email protected] see my post below to Nathan regarding short sales.

  • Dean Herbertz

    Hi mplsgrl2004, ( I am not the Debt Kid) You are correct in that it is not a myth. The lender has the right to file a defeceincy judgment against you, not that it happens all to often because they know you just went through a short sale because you had no money. I personally require the lender to provide a letter stating they will waive any such recourse when we negotiate short sales. And no it is not better to just foreclose because they can still do the same thing on a foreclosure as well. Another thing they may do however is 1099 you for the deficeincy (this happened to me personally) The current tax code gives you one freebee for this on your personal property so it wil not be added as income. you do need to consult an accountant for tax implications however. Good luck….Dean.

  • Dean Herbertz

    Hi My, Just to be clear I think a lot of people on this blog seem to forget the purpose of a short sale. #1 You have to be behind on your mortgage and have some kind of hardship to justify why you are in your current situation. If you have equitable assets somwhere else then a short sale is no the answer because it will never be approved. This will come out in your financials. Talk to a Real Estate attorney but my profesional opinion is if your married these are still joint assets. It is all about complete disclosure. Good Luck…Dean

  • Dean Herbertz

    Hi Lanita, this reply is probably a little late but if you are doing a short sale be ready to move quick. Once it closes the new owner can take possession.

  • Robert


    I am having a big debate on weather or not to short sale as well. I have a condo in New Jersey, which I rent out since I live in California now. I purchased this condo in 10/2005 and it is now worth less than what I purchased it for, however not by much. I think market price for it is about 385 – 405k and I purchased it for 410k and owe 402k. The reason I am considering foreclosure is because I currently have it rented out for $1,900/month but my payments (1st + 2nd mortgage + HOA + tax) all come out to about $3,300 a month. So that means that I am paying an additional $1,400 a month, which before wasn’t a big deal but now the time has come where I can’t afford to do that anymore.

    Other than my IRA, I do not have any money in savings so I can’t afford to sell it normally because I would have to pay the 5% realtor commission which would then put me back about $20k. I know my case isn’t as bad as some other ones on here but it is my personal case so in my eyes it’s pretty bad. Could anyone give me some ideas on what I should do here?

  • Nicole

    I need some advice on a rental property that i have. We lose 300 a month on it and we don’t know what to do with it. It is in a really bad area and a bad school district. We moved here from new york and did not know what we were getting ourselves into. We just bought a new house. Any ideas that will not kill my credit???

  • Will

    I live in California and did a chapter 7 bankruptcy in Oct 2008 which was discharged Feb 1, 2009. I listed my only real property in the bankruptcy, my homsteaded principal residence. I owe about $120,000 on the property which is currently valued at $90,000. The loan was serviced by Washington Mutual and is currently serviced by Chase. I have stayed in my residence and continued to make my payments. After the bankruptcy my credit score went down to 645. I was told I couldn’t get another federally insured loan (or any loan) until Feb 2011. The property is no longer listed on my credit report. I would like to buy another residence at a REASONABLE price at that time. The question is : what are my rights? If I don’t make my payments do they even need to foreclose or would this just be a formality? Under these circumstances would a short sale even be appropriate since the $120,000 debt was discharged in the bankruptcy and a reaffirmation agreement was never signed? Does anyone have any ideas…..HELP!!

  • nate

    Hi, this is some good info here. Thank you Dean for your responses. My wife and I currently own a condo and owe 338k in southern CA. The current value has it at about 250-260k. My wife lost her job (we are both teachers) and without unemployment I don’t make enough to cover all of our bills mortgage included. We are thinking of a short sale. I have spent years building excellent credit, I am at 819 fico score. But to be honest the prospect of being 80k in debt on a condo that we soon cant afford seems worse than losing some credit points. My credit will rebuild quicker than the equity in our home.

    My main question is three parts:
    1. I own an investment property in Florida that still has equity. What would happen to that in a short sale? Should I try to move that? Possibly get my parents involved and sign it over to them? That is costing me about $360 per month to hold on to that.
    2. We have about 20k in savings that we were saving for a downpayment on a new home or to use for emergencies. Would the bank go after that? Would that entice them to allow us to do a short sale? I would hate to lose that money.

    Thanks in advance for advice.

  • Fanny

    My fiancee and i were talking the other night about where we want to live after marrying and he told me he would probably go for a short sale. What happens if i marry him before he does that? Would that affect my credit???
    Thanks :)

  • val p

    Hi I had an investment property in FL that was able to short sale in 10/09 before foreclosure finalize, but on all of my 3 credit reports appear as “FORECLOSED” on 11/99 with a past due amount shown on one of them. It does show a “zero balance” on all 3 of my credit report. Is it a good idea to try to correct this with the CRA’s.

  • Pingback: How Does a Short Sale Affect My Credit? | HOW DOES A SHORT SALE WORK

  • Sade

    Except for this article explains credit rating impact after a short sale slightly better.
    Undertaking loads of analyzing currently regarding short sale. Tense days. Wish mine will probably be done quickly. Best Of Luck

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