If you have to deal with a home that is “underwater” or whose worth is far below the mortgage amount, you can have a tough time financially. If you have to face foreclosure that is still worse as it damages your credit rating and remains in your credit report for a period of 7 years. Under such circumstances, the only solution is a real estate short sale.

What happens in real estate short sale?

In short sale, when you enter into an agreement with the lender it implies that the lender has agreed to settle for an amount that is much less than what he should be actually getting back. There are many lenders that avoid short sale. This is because; foreclosure may be much more beneficial for them. It is also important to remember that you cannot opt for a short sale if you wish to. Your property has to qualify for the same. Usually lenders shy away from such deals. But the U.S. government is putting in all efforts to make it more agreeable for lenders.

Short sale is a good option to avoid foreclosure. Nevertheless, in few states a homeowner can enjoy more legal protection if he opts for foreclosure. Under such conditions, your credit rating is affected in the same manner irrespective of the option you choose.

How will short sale affect your credit score?

If you are opting for short sale, it can affect your credit score in the same manner as it would have had you opted for foreclosure. Quoting Craig Watts who is associated with Fair Isaac, the company that is responsible for preparing FICO scores states “If someone is unable to repay their mortgage, regardless of how that turns out, that failure to repay the mortgage is highly predictive of future risk”.

Whether you are opting for a deed-in-lieu, foreclosure or short sale, you have to walk away from your home once the property deed is transferred to the lender. This is because all the 3 cases are regarded as “serious delinquencies”.

How the short sale procedure will affect your credit score depends to a large extent on what your score was prior to initiating the short sale process. If your score was somewhere around 700, it could drop by 200 points. However, the impact is less severe on your credit score if you already have a ruined credit rating.

Useful Sites:
Foreclosure – Foreclosure listings and foreclosure investing strategies along with pages for home-owners seeking foreclosure help. Free resources to find foreclosures and pre-foreclosures, all the information you need.
Utah Homes for Sale : Find Utah Homes for Sale – View all active MLS listings of Utah Homes for Sale, Condos, Foreclosures, and Short Sales. View pictures, prices, realtor remarks, and property’s address.