Special Considerations for Short Sales: Impact on Credit Score and Mortgage Debt

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As an illustration, in the event of declining real estate values, a homeowner mortgagedove might sell their house for $150,000 while still owing $175,000 on the mortgage. The shortfall of $25,000 (excluding closing and selling costs) is considered a deficiency. However, before initiating the short sale process, you must get the lender's sign-off, commonly known as a pre-foreclosure sale. The mortgage holder must present compelling documentation justifying the necessity of a short sale. The lender's approval is a prerequisite for any short sale to proceed. It's important to note that short sales are typically lengthy and involve substantial paperwork, often taking up to a year to complete. Nevertheless, unlike foreclosures, short sales have a comparatively milder impact on a homeowner's credit rating.