Short Sales and You: What to expect

With the current decline in the housing market, more and more owners are having problems selling their homes for as much, or more, than they owe on it. This situation can lead to either a short sale or a foreclosure. Many people are familiar with the term “foreclosure” (a court-ordered termination of the owner’s rights to that home), but not so informed when it comes to the short sale option.

A short sale is the process in which a seller lists his or her house for sale because they are behind on their mortgage payments and the bank has agreed to sell it for less than is owed on the home. (Note: it is possible to arrange a short sell without being in arrears; however, it is more likely that your lender will agree to one if you are behind in your payments). Because not all lenders will agree to a short sale, it is essential that you have a real estate professional experienced in handling short sales, working for you. Your agent can contact the lender’s loss mitigation department to work out a short sale agreement—something you probably wouldn’t be able to accomplish on your own.

How will a short sale affect your credit?

Several sources agree that although your credit will be negatively affected by going through a short sale—with a credit score decline averaging 100-300 points—you will still fare better than if your home has to be foreclosed on. Not only will your credit score decrease more with a foreclosure, but the action will stay on your credit record longer (average of 5-7 years) as well.  With a short sale, you could possibly secure a new home loan within two years. According to, “Fannie Mae guidelines allow a seller to immediately apply for a new loan to buy another home if that seller kept the payments current, had no delinquencies exceeding 30 days and did not agree to repay the debt relief. Moreover, it's the late payments that affect your credit report, not the short sale.”

What can I do?

If you find it impossible to continue making your mortgage payments on time, you should immediately consult a real estate professional who is experienced in dealing with short sales. He or she will be able to provide insight into the short sale process and let you know what your options are. They will not give you legal advice, but instead can provide a wealth of information on the options available so that you can make the best decision for YOU.  The key is to find an ethical, reliable, honest real estate professional that is there to help you and not just gain a commission on the sale of your home.

Bill Zufelt is an ethical real estate professional who has helped many clients with the short sales of their homes. With his expertise, Bill can provide you with the information and guidance necessary to help you make the decision about the sale of your home that works best for you.

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Bill Zufelt  Realtor® License #01491164