Posted by Brian M. Powers(MI) on July 11, 2002 at 04:26:44:
thanks JT. my reason for asking was i wanted to be able to counter the sellers attitude of “at this point i might as well just let the bank foreclose”. if i can show them a better alternative than it helps my chances, i would think.
by the way, baseball is looking pretty bleak these days…it might be time for your buddy to cash in his collectibles!
BMP
Effect of a Short Sale on Sellers Credit - Posted by Brian M. Powers(MI)
Posted by Brian M. Powers(MI) on July 10, 2002 at 19:56:20:
When a bank agrees to a short sale and writes off the loan at a discount, how negatively does this impact the sellers credit? Is it less damaging than full foreclosure?
Thanks.
BMP
Re: Effect of a Short Sale on Sellers Credit - Posted by Dwan Bent
Posted by Dwan Bent on July 11, 2002 at 23:29:45:
Hi Brian,
I love to see short sale questions as it is my speciality.
When a bank accepts a SS it is payment in full. So what shows on the credit report is a bunch of late payments and then the loan shows satisfied. Anyone looking at credit reports would realize the property was sold under duress. It is still much better than a full-blown foreclosure anyday.
Banks accept SS for many reasons. One of your follow-up letters was incorrect. A homeowner does not always have to prove duress to get a SS accepted. Banks have a lot of wierd rules… some banks have to show a loss each month… some banks can only have a certain percentage of bad loans at any given time… and so on.
I have done hundreds of SS and usually the only thing I have to show the bank from the homeowner is a hardship letter explaining why they can’t make the payments anymore. The rest of the SS package I send is information to justify my low offer.
Banks are in the business of lending $$ not owning property. Low comps, a long list of repairs, and some nasty pictures will get you a long way.
If you are anyone has any questions on SS call me at 303-838-5532. It’s my favorite subject.
Good luck to you.
Sincerely,
Dwan Bent
Re: Effect of a Short Sale on Sellers Credit - Posted by JT-IN
Posted by JT-IN on July 11, 2002 at 01:25:22:
Brian:
Yes, the SS is less damaging than a FC.
There should be no further negagtive impact on the Sellers credit from a SS, as the lender is agreeing to take less, as payment in full. This should then show as paid in full; period, but not necessarily as “paid as agreed”.
However, for a borrower to even be eligible to qualify for a SS, they must be able to demonstrate the lack of resources or income to pay any deficit that would exist from a shortage in a selling transaction. Translated, this means that they must be pretty destitute, which usually comes at the expense of being in pretty dire straights overall in financial terms. Normally at this point there have been other unmet obligations, and the commensurate negative impact on ones credit that goes along with this problem.
It seems that you must be comparing from more of hypothetical standpoint, than that of reality… Reality at the point of a SS is “who cares”, as to the financial fallout on the credit rating, in any case that I have seen.
JT-IN