How Long Does A Short Sale Stay On Your Credit?

In today’s blog post, we’ll explore how long a short sale stays on your credit reports and what life looks like after a short sale. Whether you’re a homeowner or a real estate agent working with clients, understanding the aftermath of a short sale is crucial.

Understanding Short Sales

Before diving into the post-short sale journey, let’s briefly explain a short sale.

A short sale occurs when a homeowner cannot afford the house, they have a prove financial hardship and they have to sell. But unlike other traditional sales, they can’t sell without owing any type of funds, so we negotiate on their behalf and get their lender to accept less than what is owed including everything, any type of liens, judgments, closing costs, all of that will be negotiated and factored in the sale.
So if you’re here, most likely you’ve already done a short sale and you know what that looks like.

A key concept in short sales is the deficiency, which is the difference between what you owe and the sale price of the house. For example, if you owe $300,000 and sell the house for $150,000, you have a deficiency of $150,000. Ideally, if you worked with an experienced negotiator, this deficiency would be waived, meaning you wouldn’t owe anything after the sale. So you shouldn’t be liable or you shouldn’t owe anything after the short sale and the debt is wiped and you’re walking away free and clear.

Impact on Your Credit

Once your short sale process is complete, your credit report will reflect that it’s a paid transaction. It may be listed as “paid” or “paid for less,” but in either case, the debt is considered resolved. The missed payments leading up to the short sale are what heavily impact your credit score, but once the short sale is finalized, these missed payment reports will cease.

Rebuilding Your Credit

After a short sale process, the focus should be on rebuilding your credit. Here are some steps to help you get back on track:

  1. Pay all new debts on time: Consistent, on-time payments will improve your credit score over time.
  2. Consider working with a credit repair service: These services can offer guidance and strategies for credit rebuilding effectively.
  3. Plan for future homeownership: Aim to secure a two-year lease post-short sale. During this period, focus on improving your credit score. After two to three years, you may be eligible for an FHA loan or even a conventional mortgage.

Buying Again After a Short Sale

It’s possible to purchase a home again two to three years after a short sale, depending on your credit recovery and the date of the short sale. When you’re ready to buy again, ensure you’re in a better financial position to avoid repeating past mistakes.

If you’re just starting to consider a short sale, it’s essential to understand your options and act quickly. Avoid falling behind on payments if possible. If you’re already behind and owe more than your home is worth, seek professional help immediately. The sooner you act, the more options you’ll have to avoid foreclosure process and minimize credit damage.

Final Advice

Don’t wait until the last minute to address your financial difficulties. The longer you wait, the fewer options you’ll have, and the less willing lenders will be to help.

So if you get the chance to have your debt settled and get out of that situation without owing anything, then that way you can set yourself up so that you can have a fresh start because what’s the point of homeownership? It’s to build wealth and create wealth. It’s to be able to build equity so that you have that asset not be over leveraged and owe more than it’s worth and never be able to get out of it.
At that point, you might as well just rent so that you’re not on the hook, you know, for that big of a loan, so when you’re thinking about doing a short sale, understand that if you’re at the very beginning stages, always do your mortgage payments, if that’s an option, don’t fall behind. But if you’re already behind, make sure that you’re getting help and you’re not waiting until the last minute.

For more information and guidance, don’t hesitate to reach out. We’re here to help you navigate this challenging time and set you up for a fresh start. The more information you have, the better decisions you can make.

Short sale Credit


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