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One of the major concerns for persons considering a short sale is how their credit will be impacted. Unfortunately, there isn't a single clear answer. Every situation is different.
Most people considering a short sale are falling behind on their mortgage. The further behind you are, the bigger hit to your credit - but that's true whether you sell or not, as late and missed payments will have a negative effect on credit scores.
In the case of a short sale, if you are completely current on your mortgage, the hit to your credit score will be much less than for someone who is three months behind on payments.
With both short sales and foreclosures, some of the negative impact on a borrower's credit score comes from any missed payments and/or defaulting on the loan. Any further damage to the borrower's credit comes from how the short sale is reported by the lender.
A short sale is, after all, a type of settlement and may be reported by the lender as such. A "settled" debt is one in which the lender accepted less than the amount owed. A settlement will always have a negative impact on a credit score.
Are there ways to minimize the damaging effects of a short sale? Absolutely! We can help you determine if a short sale is the right strategy for you and determine your potential tax liability, if any.
Don't lose heart. Call today to speak to somone who knows short sales and foreclosures inside and out. We can help!
Tax Preparation, Tax Planning and Accounting Services for Phoenix, Scottsdale & Surrounding Areas