How badly will a short sale affect my credit and how quickly will it bounce back?

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How badly will a short sale affect my credit and how quickly will it bounce back?

I have a condo that I can no longer live in. Unfortunately, with this market, I won’t make the money I need to on the condo. If I settle for a short sale, will this destroy my credit?

Asked on May 17, 2012 under Real Estate Law, Massachusetts

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

It really depends on how the bank reports the debt. If you are already behind in payments then it has already been reported and effected your score. Some banks report it as a pre-foreclosure in redemption, meaning you were at risk of foreclosure but were able to prevent it. Others will consider it forgiven debt (which it technically is), which is viewed more negatively by the credit bureaus. If you are not in default and can try and negotiate the sale with the bank and how they report it then you are ahead of the game.  Make sure that you have the bank waive the deficiency judgement against you.  Good luck.


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