Expert: Lori Frankfort - 4/21/2010

Question
We would like to sell our home but one real estate person has told us that we are probably upside down, owing more than we can get for our house.  We need to sell our house or rent it out due to an upcoming move to Texas.  I would prefer to be rid of the obligation and not have to deal with renters.  I would like to know if doing a short-sale will effect our credit, and if so how badly will it affect our credit.  Also, we are current with our house payment and I've heard that you have to be at least 30 days late on your payments before a short-sale will even be considered.  Thank you for your advice.  Dianna

Answer
Hi Dianna,

Doing a short sale will definitely ruin your credit.  Yes, you need to be past due in order for the bank to consider the short sale.  They have to believe that you are headed to foreclosure, otherwise they wouldn't agree to accept less than what you owe.  First you have the late payments on your credit, then the short sale, and in many instances the bank calls the short-fall income, and you get 1099'd for it.  Avoid it any way you can.  Best, Lori