After a short sale the homeowner may still be liable for the difference between the amount owed on the mortgage and the amount of the sale.
This is referred to as a deficiency.
If a deficiency comes into play, the lender may sue for collection of the debt.
Some states don't sanction the collection of deficiency.
However, if you live in a state which does allow for the collection of deficiency, the lender can obtain a judgment for the amount owed.
An experienced attorney should be able to advise you of your state's laws and be able to aid in negotiating with your lender.
In regards to your credit score, the negative impact of a short sale is generally less than that of a foreclosure.
A short sale will not show as a foreclosure on your credit report, however, the previous delinquency on your mortgage will appear.
The short sale will usually appear as a pre-foreclosure in redemption.
The delinquency and change of status on your mortgage loan is what will actually lower your credit rating.
The consensus is that a short sale may result in a loss of about 100-200 points on the borrowers FICO score.
A foreclosure may result in a loss of 250-300 points of more.
In the world of banking, however, lenders interpret both of these events only one way: the customer did not pay as agreed.
If you must choose between a short sale and allowing your home to go into foreclosure, from a credit perspective, a short sale is probably the wiser choice.
There is also an advantage when it comes to buying another home.
If your house is foreclosed upon, you are required wait a minimum of two to five years before attempting to buy a new house.
Short-sellers need only wait for 10 months to two years.
Remember that a short sale means you will not be gaining any money after the sale of the home, so you will have to save up the money for a down payment on your new home.
This is referred to as a deficiency.
If a deficiency comes into play, the lender may sue for collection of the debt.
Some states don't sanction the collection of deficiency.
However, if you live in a state which does allow for the collection of deficiency, the lender can obtain a judgment for the amount owed.
An experienced attorney should be able to advise you of your state's laws and be able to aid in negotiating with your lender.
In regards to your credit score, the negative impact of a short sale is generally less than that of a foreclosure.
A short sale will not show as a foreclosure on your credit report, however, the previous delinquency on your mortgage will appear.
The short sale will usually appear as a pre-foreclosure in redemption.
The delinquency and change of status on your mortgage loan is what will actually lower your credit rating.
The consensus is that a short sale may result in a loss of about 100-200 points on the borrowers FICO score.
A foreclosure may result in a loss of 250-300 points of more.
In the world of banking, however, lenders interpret both of these events only one way: the customer did not pay as agreed.
If you must choose between a short sale and allowing your home to go into foreclosure, from a credit perspective, a short sale is probably the wiser choice.
There is also an advantage when it comes to buying another home.
If your house is foreclosed upon, you are required wait a minimum of two to five years before attempting to buy a new house.
Short-sellers need only wait for 10 months to two years.
Remember that a short sale means you will not be gaining any money after the sale of the home, so you will have to save up the money for a down payment on your new home.