how bad does short sale mess up credit?

[shaung]

I was wondering how long after a short sale you have to wait until you can buy another house?How bad are the effects of the credit and how long?thanks

[Moe Bedard]

Your credit could take a hit of 200 to 300 points, depending on the overall condition of your credit. If your FICO score before was 720, it could dip as low as 520-420. Ouch

[shaung]

thanks for the quick response Moe.My score is about 670 and wife is about 700.I owe about 25k in debt and am thinking of a short sale with normally takes about 6 months(I think)I will not pay morgage.$2600 x 6 months= $15,600 that I can pay off.My credit will go to crap from the house but might go back up a little bit with all the debt payed off.I can ask my Dad to buy a house at fair market value in his name and
I can pay for it.Please let me know if I am wrong or what you all think

[sandyh]

Ours dropped around 100 points when we sold our rental. It might have helped that we still had mortgages on our credit that were current. I'm not sure if you can get it, but we had a good contact at National City and she gave us a letter that stated we "paid in full." That helped us to have one credit agency actually not report it as a charge-off and it simply said "paid in full." Remember that lenders are not required to do reporting.

[Moe Bedard]

My pleasure. Short sales can take from 3,6 and 12 months in some cases. So, time will be on your side.

You're not wrong to think like that and I am not sure on the laws there or if they will allow what is called an 'arms length transaction'. I would take with a really, really savvy short sale Realtor and attorney on this.

[shaung]

thanks again

[CW California]

Doesn't it suck that you can pay your bills on time. Me, for more than 30 years, never paid one person, one bill late. Finally I am able to buy a house. Four years later the economy crashes, my business isn't as profitable and now I stand to loose everything. Just seems to me that there is something about this to remove all wealth from the middle class and not only are the banks involved in it but so are all our politicians.

[Melanie702]

Hi, when going through a short sale, you can stay in the house that whole time without paying? My husband and I were just talking about doing that on our property. We are in Vegas, and have been hit the hardest and it looks like there's really no hope for us. My husband is still unemployed, our city just had hundreds of more layoffs yesterday on the strip, and NACA hasn't gotten back to us with the forbearance they proposed to BoA. We owe $218,000 on our mortgage, and it's only worth about 180 at the most. My neighbor's house, which is the same model as ours, is selling for $129,000!!!! If we do end up going through with a short sale, and there's a balance leftover, are we still liable for that even though it's a short sale? Not sure how it all works.

[shaung]

thanks again Moe,have you ever heard of this company or can you point me in the right direction to a reputable compny that can help with short sale or a Realtor.Let us help in your short sale negotiations at no cost to you! - California Short Sale Solutions

[sandyh]

Originally Posted by Melanie702

Hi, when going through a short sale, you can stay in the house that whole time without paying? My husband and I were just talking about doing that on our property. We are in Vegas, and have been hit the hardest and it looks like there's really no hope for us. My husband is still unemployed, our city just had hundreds of more layoffs yesterday on the strip, and NACA hasn't gotten back to us with the forbearance they proposed to BoA. We owe $218,000 on our mortgage, and it's only worth about 180 at the most. My neighbor's house, which is the same model as ours, is selling for $129,000!!!! If we do end up going through with a short sale, and there's a balance leftover, are we still liable for that even though it's a short sale? Not sure how it all works.

I'm not an expert but can share what we were told and what happened with us.

We sold our home for about $45k less then the 1st & 2nd. With the second, we contacted them and asked if we could carry an unsecured loan with them so we could go forward with the sale. They then suggested that they do a short sale and write off the amount. They came and did an inspection of the house to make sure I guess we weren't selling it under FMV. They then accepted the short sale. We were very concerned with our credit at the time (that is why we originally requested to keep paying). We didn't realize it would take a hit until after we got the first credit report back. It showed both deliquent and charge off. We were upset as we were never late. It was some mix up with the transfer of ownership. National City corrected the deliquent reporting and it shot our credit back up (originally we had about 150 hit, and then it went up about 50 when the delinquency was removed). So for us, we are glad we weren't delinquent.

We also considered paying them back the $45k in which case National City said they would then take away the charge off report. After much consideration, we decided it was better to live with the hit on our credit and not pay the $45k. National City released us of our liability. You do get sent some tax form to say you got that relief of debt - not sure how it played into our taxes. I think we had to consider it some type of income - I can't remember. That made us pretty upset as well as we didn't know that. In hindsight, it is hard to know what is best. If you have a lot of debt (we do), when you score goes down, then all of your rates are affected. Suddenly you are having to pay more per month, pay more interest, etc. For $45k, probably worth it. For 10k? It is hard to know. Depends how much other debt you have and how much it will be affected.

Good luck.

[CW California]

Originally Posted by sandyh

I'm not an expert but can share what we were told and what happened with us.

We sold our home for about $45k less then the 1st & 2nd. With the second, we contacted them and asked if we could carry an unsecured loan with them so we could go forward with the sale. They then suggested that they do a short sale and write off the amount. They came and did an inspection of the house to make sure I guess we weren't selling it under FMV. They then accepted the short sale. We were very concerned with our credit at the time (that is why we originally requested to keep paying). We didn't realize it would take a hit until after we got the first credit report back. It showed both deliquent and charge off. We were upset as we were never late. It was some mix up with the transfer of ownership. National City corrected the deliquent reporting and it shot our credit back up (originally we had about 150 hit, and then it went up about 50 when the delinquency was removed). So for us, we are glad we weren't delinquent.

We also considered paying them back the $45k in which case National City said they would then take away the charge off report. After much consideration, we decided it was better to live with the hit on our credit and not pay the $45k. National City released us of our liability. You do get sent some tax form to say you got that relief of debt - not sure how it played into our taxes. I think we had to consider it some type of income - I can't remember. That made us pretty upset as well as we didn't know that. In hindsight, it is hard to know what is best. If you have a lot of debt (we do), when you score goes down, then all of your rates are affected. Suddenly you are having to pay more per month, pay more interest, etc. For $45k, probably worth it. For 10k? It is hard to know. Depends how much other debt you have and how much it will be affected.

Good luck.

So it sounds like you only need to get permission from the 2nd if the 1st is going to be paid in full?

[sandyh]

Originally Posted by CW California

So it sounds like you only need to get permission from the 2nd if the 1st is going to be paid in full?

That was how it was for us. There might have been some communication behind the scenes between the two, but we never heard boo from our 1st (which was Chevy Chase). They probably will just glad they were being paid in full...

[Moe Bedard]

Originally Posted by CW California

Doesn't it suck that you can pay your bills on time. Me, for more than 30 years, never paid one person, one bill late. Finally I am able to buy a house. Four years later the economy crashes, my business isn't as profitable and now I stand to loose everything. Just seems to me that there is something about this to remove all wealth from the middle class and not only are the banks involved in it but so are all our politicians.

That is exactly what is happening. Very few people will come out of this clean and it is the super rich secret banking families that are tied to banks like Chase, Investment houses like Goldman Sachs and the Federal Reserve who answers to no one yet calls the money shots in the US.

They have made a whole society wage and debt slaves. Think about that? (I think this post belongs in my conspiracy theory forum )

[CW California]

I used to get information in the mail about 30 years ago when I was in my 20's about the trilateral commission and how various politicians were members along with the bankers. I would just chalk it up as bs but now it does make you wonder.

While we are on the subject of short sales. My 2nd is with Citi and they are the ones that stand to loose the most. What are my odds of getting a modification with Bank of America(the 1st) if they aren't under the value? I'm going thru NACA. Is it possible that Citi will be easier to deal with on a short sale? I heard BofA (CW) were horrible on short sales.

[Melanie702]

Thank you, Sandy. That info. helped a lot. I guess we really need to think hard whether we should go that route or not.

[FedUp02]

Welcome to the U.S.S.A.

[Moe Bedard]

While we are on the subject of short sales. My 2nd is with Citi and they are the ones that stand to loose the most. What are my odds of getting a modification with Bank of America(the 1st) if they aren't under the value?

Yes. They are just tough to deal with. I have connections at Countrywide and a few in BofA that I can utilize on a case by case basis. I have Citi contacts that can get emergency stuff done for LoanSafe.org. However, soon we may have an agreement to submit and track right from the forum (well a private forum )

My thoughts are that there is just sooooooo many people who need help and a lot of employees that work for them are inundated, some don't care and some drop the ball. It causes a big cluster ball of miss communications and homeowner hamster wheels.