How will a short sale affect my credit?
In a successful short sale a lender accepts less than what is owed on the mortgage so that the homeowner can sell their home at market value. While there is no “short sale” credit mark, the usual result is your mortgage being marked on your credit as “paid for less than full balance”,”settled for less than owed” or some similar language.
While it is a derogatory mark, there is no exact formula for how many points this will drop a credit score as it depends on every individuals entire credit picture. Also, some folks miss payments during their short sale, further dropping their credit score. Others do not and are able to close with few or no missed payments, easing the credit ramifications.
What are the advantages of a short sale vs. foreclosure on credit?
The main benefit of the short sale is not actually the lessened hit to a credit score. There are several advantages to a short sale vs a foreclosure which go far beyond credit:
- The most significant advantage of a short sale is the ability to be able to settle the balance on the mortgage debt. Florida is deficiency judgment state, so lenders are allowed to pursue foreclosed homeowners for their losses after a foreclosure. In a short sale we are able to negotiate terms of debt settlement with the lender and we do successfully receive a full deficiency waiver over 99% of the time, which permanently ends your mortgage debt obligation.
- The other main benefit of a short sale is a quicker resolution over foreclosure. Foreclosure in FL can take as much as a few years. That is a few years of missed payments, followed by a foreclosure on the credit which results in a much longer recovery time overall. After the foreclosure is over, it could take as many as 4-7 years to qualify for a new mortgage. The average short sale takes 4-6 months from beginning to end and will generally keep you from qualifying for a new mortgage for ~ 3 years. The 3 year period is not due to the credit score itself, but instead to lender guidelines for writing new mortgages.
The outlook after the short sale closes:
All the clients that I have heard back from after their successfully short sales their credit report a quick recovery to their credit score, and just a few years later I have been able to get many of these same former short sellers into new homes again.
Is a short sale a perfect solution with no ramifications? No, nothing is. Is it likely one of the very best ways to cure an over-leveraged mortgage situation and move on quickly? Absolutely.
Here at Reid Real Estate Group we've helped hundreds of homeowners move on from their over-mortgaged homes since 2008, and we can help you!
Minna is, without a doubt, the VERY BEST OF THE BEST!! She is extremely knowledgeable, responsive, and efficient; there aren't enough superlative adjectives to describe how Excellent she is at her job! I have another house that I am selling and I wouldn't even think about hiring another Realtor/Broker - why would I, there is NO ONE better than Minna and her team !
J.S.
Last Updated on October 21, 2025 by Minna Reid
