Short Sales
Basically, a short sale occurs when a seller is facing foreclosure and agrees to a deal with their mortgage lender to accept less than they owe on the property to avoid a foreclosure.
Foreclosure rates are hitting record levels Many sellers are turning to short sales as a way to avoid foreclosure. The result of a short sale is that the seller doesn't have to go though a foreclosure and the buyer purchases a property at a lower price. The lender then avoids the responsibility of selling the property.
Keep in mind that there are negative consequences for short sales, yet less damaging than those associated with foreclosures and bankruptcy. A homeowner's credit will still be negatively affected by settling with the mortgage lender.
The effects on credit are about the same for foreclosures and short sales. Either one will drop a sellers overall credit score by 200-300 points. Yet, short sales do have less negative effects than foreclosures. Short sale sellers are more likely to be seen as less risky than foreclosed sellers. You should look into the Fannie Mae guidelines to see how short sales are calculated into your credit rating.
Short sales are not an easy process and legal and tax advice should be considered.
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