short saleKnowing how to set up a short sale without taking a hit on your credit report could make the difference between a 750-point and a 500-point credit score. In order to get through this process and keep your current score intact, you need to understand exactly what your financial responsibilities are.

Goal of a Short Sale

When you are going to short sell your home, you’re agreeing to take a lower price than the home is actually worth. This could be a case of having to move right away, an inability to make payments or just a desire to leave town as quickly as possible. Either way, you are responsible to making up the difference between what you owe and what your selling price is.

First of all, you need to confirm that your lender will accept a short sale price. They may have policies in place against this in order to protect themselves from major losses. If you’re unsure of where to turn, you can always set up an appointment with a real estate expert in your city or town. They may be able to help you negotiate a deal with the lender that benefits everyone.

Using Cash to Pay the Difference

Keep in mind that if you have any type of savings set aside, this may be required to make up the financial deficit. Even if you have to pay out a large sum of this money, it’s better than going into default and getting dinged on your credit report. You’re going to need as high a credit score as possible when trying to negotiate a new purchase contract.

The potential credit hits range quite a bit depending on how late you make any applicable payments. It could be as low as 40 points for being a month late on the bill, or as high as 135 points for a three month default. This is why it’s very important to stay on top of these bills even while you go through the short sale process. If for some reason the short sale does not go through, a foreclosure could lower your credit score by 160 points.

As long as you stay current on these amounts, then your credit score will suffer as little as possible. Make sure you keep documentation and paperwork in order so nothing gets missed or forgotten. You’ve worked hard to get your credit score where it’s at, so don’t let a short sale ruin that for you. If you know how to get through the short sale process without going backwards on your credit score, it will be a learning experience you may benefit from.

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