Short Sale & Credit Score

Short Sale for Sellers: Let's say you have to relocate, my your home value fallen nearly $100,000, and you have to get rid of your home - the question is foreclosure or short-sale?

A short sale, in which you negotiate with the bank to sell your home for less than you owe on your mortgage will have a dramatically negative effect on your credit. A consumer who has been through a short sale could see a drop in his/her credit score of up to 200 points, essentially the same decrease as if the homeowner gone into foreclosure, says John Ulzheimer, president of consumer education for Credit.com. and like a foreclosure, the negative mark will pull down the score for seven years.

That said, if you are underwater on your mortgage and you need to move, a short sale might be a better option than foreclosure. Going through a foreclosure will make it very difficult for you to get a loan for at least 3-5 years; with short sale, you might be able to qualify within 2.

Another thing to find out and consider, the forgiven debt is completely forgiven; or you would be expected to pay taxes on it. (it depends on your mortgage holder)

Short Sales for Buyers: at this point, the process is not regulated, and only banks decide how long it may take, how many offers banks wants to receive, and who essentially would win the auction. If you are patient and determine to get short sale deal, do it! Please remember, the listing price of short sale is usually not what the bank is willing to accept, and there are other deals out there.