While short sales generally tend to hurt homeowners’ credit scores less than foreclosures, these transactions are a matter of public record and have some impact on homeowners’ credit history. Exactly how much damage short selling does to homeowners’ credit scores depends on a number of factors. One of the most important of these factors is who handles the transaction. Smart real estate agencies and foreclosure firms with experience negotiating short sales can often reduce the damage done to their clients’ credit scores. Individual homeowners and real estate agents inexperienced in foreclosure transactions tend to have much worse results.

Duration of mortgage default
Every late mortgage payment adds a black mark to a homeowner’s credit history, and the longer the sale transaction goes on, the more late mortgage payments will be posted to the homeowner’s credit. Sales that are completed quickly tend to inflict less damage on the owner’s credit. This is the main reason to find a professional foreclosure agent who can expedite the sale.

Deficiency Waiver
Whether or not the mortgage lender decides to forgive the homeowner the “deficiency” or remaining balance on the original loan greatly influences the impact the sale will have on the homeowner’s credit. Loan companies may choose to agree to a short sale but still hold the owner liable for the deficiency, sometimes to the point of suing the owner. This can cause great damage to the homeowner’s credit.

However, expertly executed foreclosure transactions will take precautions against the lender going after the homeowner for the remaining balance. Smart real estate companies and agents often include protection against “deficiency judgment” laws within the short sale negotiation.

How does a short sale affect my credit history?
Short sales, like foreclosures, remain on the homeowner’s credit history for seven years. However, the impact this has on your credit score can vary greatly, depending on the factors mentioned above. Sales that are completed quickly and without a deficiency judgment could result in the restoration of good credit within 2-5 years. In less fortunate cases, a good credit restoration can take up to seven years.

Find a short sales expert
Whether your Michigan home short sale is handled by an experienced foreclosure company or agent greatly affects the impact this transaction will have on your credit score. When searching for a foreclosure company, be sure to research the company’s history and references. Foreclosure agencies like Sun Law Group have a proven track record of completing foreclosure sales quickly and expertly, giving homeowners the best possible outcome.