Short Sale vs Foreclosure – EFFECT ON CREDIT, By Paul Dean, Evergreen Ohana Group

I thought this information would be beneficial to know, when you are dealing with sellers on a Short Sale basis. Many consumer don’t realize the impact of a short sale on their credit. Read the attached article and commentary from our credit agency below. There are a couple KEY pieces:

1. Foreclosure – lenders won’t do another loan for 4 yrs. (Bankruptcy is now 4yrs also)

2. Short sale – if they keep payments current and their credit is relatively intact, and they do due diligence with the lender to determine how they will report the Short sale on their credit report (ie. “settled” is the best, Deed in Lieu is the same effect as a “foreclosure”) this will result is the least amount of damage to their credit rating. That also goes for a Notice of Default (NOD), even though a foreclosure process was started and the seller is able to sell the home prior to it actually going to foreclosure sale, this will be reported as “foreclosure in process” on their credit, which is treated as a “foreclosure” for credit scoring purposes.

3. Oregon is not a deficiency State. Meaning that Oregon does not pursue the seller for any deficiency. The banks just take the loss, the seller’s credit is damaged, and that’s the end of it.

4. The biggest advantage to sellers in a Short Sale is keeping payments as current as possible and getting the lender to reflect the account as “settled”. That will allow this borrower to secure another home loan sooner (maybe 2yrs), rather than if a foreclosure or NOD (4yrs) is reported on their credit.

I think this is valuable information to share with your sellers.

To Your Success,

Paul Dean
Evergreen Ohana Group
5331 SW Macadam Ave, Suite 287
Portland, OR 97239

Office: (503) 892-2800 Ext.11
Fax: (503) 892-2803
OR ML-21,WA 510-LO-33391, WA:520-CL-50385