Expert: liznarr - 7/13/2009

Question
Hi. My husband and are currently living in Northern Florida where he is stationed in the military. He is due to be transferred next summer and we are trying to figure out what to do with our house. We thought with being here a full 4 years that our house would have increased in value but it has decreased about 20,000. So, now we really cant afford to sell it at the decreased price and my husband doesnt want to deal with renting it out either. So, we are looking into short selling. I was hoping that maybe you could tell me more about it. The main thing we are wondering is just how much it will affect our credit. From what Ive read it sounds like it will affect your credit some but not as much as doing a foreclosure. If it does not affect our credit too much this is probably something we would like to do.. Can you give us some more info about it if you have any? I really appreciate your help!

Answer
Hi Jennifer,

I’m very sorry to hear that your home has decreased in value and that you will need to sell by next summer when your husband is due to be transferred.  You are not alone, as the numbers of people in similar situations are frightening due to our bad economy now.  Unfortunately, that is not much consolation to you.

You are doing the right thing by investigating all your options as early as possible and educating yourself on the topic of short sales.  If you do decide to go this route, make sure you deal with a Realtor who is experienced in short sales.

There are varying opinions of the effect on a Seller’s credit when doing a short sale.  A short sale will definitely affect your credit, but not as much as a foreclosure in most instances.  Neither is good, but the effect on your credit (time-wise) from a short sale could be from twelve to twenty-four months versus up to a five-year period with a foreclosure.  

Here are a couple links where you can read about the effect of a short sale on your credit:

http://faarforum.com/2008/06/short-sale-vs-foreclosure-is-there-a-difference-on-...

http://homebuying.about.com/od/4closureshortsales/qt/060907SScredit.htm

Another good site you can visit to learn about help for homeowners is

http://www.makinghomeaffordable.gov/

I would also suggest that you talk with your lender and also contact an attorney at the military JAG office for more pointed answers to some of your questions.  It’s possible the JAG office might have other suggestions or know if there is any additional help for military families.

Good luck to you, and feel free to write again if you have additional questions.

Regards,
Elizabeth