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How Much Damage to Credit After a Short Sale?

Posted by david milstead on August 4, 2011 at 2:03am in Short Sale Discussions

 

Does anyone have concrete evidence of the damage to a credit score after a short sale if the seller is not delinquent on mortgage payments or any other items. How long will it be until they can get a loan? 

 

Any problems with credit cards?

 

Please let me know.  dgmilstead@milsteadassoc.com

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Replies

  • Steven Angelil October 31, 2012 at 5:00am

    I have a very similar situation and was hoping to find some recent posts on this.  I had a nice conversation with a young man who moved from FL to SC, is current on both his first w/ ING Direct and his HELOC w/ Regions Bank.  Breaking even/losing a little w/ his tenants.  No plans to return to FL.  Already purchased a home in SC but only real concern is the hit to his credit score.  I want to send him some info on this but not sure on what to send.  Any Superstars w/ suggestions on how to capture this listing by overcoming the credit objection??  Thanks in advance!

    • Jeff Payne > Steven Angelil October 31, 2012 at 5:26am

      First thing I would explain to them is that credit does not define a person.  There are good people with bad credit and bad people with good credit.  As far as credit scores, I have past short sale customers who did a short sale without missing a payment and their credit is stellar.  Have some who missed payments and their credit is damaged.  have not talked to any yet that have significantly reduced scores when doing a short sale without missing payments.  One particular sellers credit report has NOTHING about a short sale on it.

  • Jason Boykin August 11, 2011 at 6:48am

    I have concrete evidence because I signed up for a credit monitoring service.  I had two loans, both were short and never late.  The first one reported 15 days after the sale and my FICO dropped 5 points. The second one was 3 days later and my score did not drop at all.

     

    The funny thing was that both companies did 'hard inquiries' during their approval processes.  These hurt my score about 7 points each, more than the negative report.

     

    I'm buying a new home now, less than 60 days later and I'm already approved for the loan.

  • Mike Ashcraft August 8, 2011 at 4:57am
    I have been told there are new loan programs for people that have done a Short Sale and they are able to get loans within months after closing the Short Sale.  The qualifier to that is they have to not have had a NOD issued.
  • Kimberley Kelly August 8, 2011 at 2:13am
    I think the all over the map scenario would be the best to believe.  Remember, our Credit Rating System is probably no more "guided" than the Short Sale process..Agree with Karyn here..If you have a good down payment, probably get a loan much quicker than you may think..
  • Karyn samuel August 7, 2011 at 4:51pm

    I had a seller that fits this bill, who had very good credit, never missed a payment, did a short sale and had no PM and WF waived the DJ.  The credit score went down 70 points.  They were able to finance a home purchase only using an FHA type of product almost immediately after the SS took place.  IF they wanted to finance going conventional, they have to wait two years from the date of the SS.

     

  • Thom Colby CA Brkr 888-391-5245 August 7, 2011 at 8:29am

    I've had them all over the place.  One client was not late on anything - mortgage, credit cards, car payments, etc.  Short Sale on house caused a 150 point drop on FICO.  I had another one, no mortgage payments for 4 months, everything else perfect - FICO dropped only 50 points.  Another, house went to foreclosure but everything else was perfect, no change in FICO. 

     

    In many of these cases, it has to do with more than the mortgage.  If Credit Card balances are 80 - 90% of their limit and they have mortgage issues, their FICOs will drop significantly.

     

    I've attached a document provided by one of our local Title Companies describing the effects of a Short Sale on Credit.

    EFFECTS.doc

  • James Lockard August 7, 2011 at 3:03am
    I actually had one seller's credit score go up! Score was 663 in February, we closed on his short sale in April, and in June his score was 770. This is counter intuitive but must be because outstanding debts were reduced.
     
  • Bryant Tutas August 7, 2011 at 12:33am
    Putting this in the newsletter today
  • Wendy Rulnick August 4, 2011 at 3:11am
    David - It depends on your personal credit scenario. Studies have shown that credit drops more if the original credit score is higher, unfortunately.  You may be able to get a loan immediately, if there was no judgment (deficiency) depending on the new mortgage investor. 
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