How Does A Short Selling My Michigan Home Affect My Credit Score?

Short sales are an increasingly popular alternative to home foreclosure; as the Michigan

mortgage crisis has risen, mortgage lenders have become increasingly willing to accept short sales on homes. Foreclosures present many high fees and liabilities for lenders, an in recent months the government has released several incentives for mortgage lenders to choose short sale offers over credit damaging foreclosures.

While short sales generally tend to damage homeowners credit scores less than foreclosures do, these transactions are a matter of public record and do have some impact on the homeowners credit history. Exactly how much damage short sales do to homeowners credit scores depends on a number of factors. One of the most important of these factors is who handles the entire short sale transaction. Savvy real estate agencies and foreclosure companies with experience negotiating short sales are often able to reduce the damage done to their clients credit scores. Individual homeowners and real estate agents inexperienced in short sales tend to fare much more poorly.

Length of Mortgage Payment Default

Each missed mortgage payment adds a black mark to the homeowners credit history, and the longer the short sale transaction drags on, the more missed mortgage payments will be tallied on the homeowners credit. Short sale transactions which are completed swiftly tend to inflict less damage on homeowner credit. This is all the more reason to find a professional short sale agent who can speed the sale along.

Forgiveness of Deficiency

Whether or not the mortgage lender chooses to forgive the homeowner the "deficiency", or remaining balance on the original loan, greatly influences the impact the short sale will have on homeowner credit. Lending companies may choose to accept a short sale but continue to hold the homeowner accountable for the deficiency, sometimes to the point of suing the owner. This can do great damage to homeowner credit.

Short sales which are expertly conducted, however, will take precautions against the lender pursuing the homeowner for the remaining balance. Savvy short sale companies and agents typically include protection from "deficiency judgement" lawsuits within the short sale negotiation.

How Does a Short Sale Affect My Credit History?

Short sales, like foreclosures, remain on the homeowners credit history for seven years. The impact this has on credit score, however, can vary greatly, depending on the factors mentioned above. Short sales which are conducted swiftly and without deficiency judgement could result in seeing good credit restored within 2-5 years. In less fortunate cases, good credit restoration may take as long as seven years.

Finding a Short Sale Expert

Having your Michigan homes short sale be handled by an experienced short sale company or agent greatly affects the impact this transaction will have on your credit score. When looking for a short sale company, be sure to research the companys track record and references.

by: Tom Cronkright

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