In a short sale, generally the seller (you by listing the home with a qualified real estate agent) finds a buyer who is ready, willing and able to purchase the home at a price that is less than the total amount required to pay off the mortgages on the home. The seller approaches the lender usually through a qualified real estate professional, who presents the offer, asking the lender to accept the short sale price as payment in full on the outstanding debt. There is nothing that says the lender has to cooperate, but often these days, lenders will agree to short sales.
According to the folks at Fair Isaac, who create FICO scores the effect of a short sale (when the seller is more than 59 days late) on a seller credit report is identical to that of a foreclosure. A short sale shows up as a “pre-foreclosure in redemption” status which is likely to result in a loss of 200 to 300 points. This means a short sale seller with a previous FICO score of 720 could see it fall to 420. You may want to consider staying put for the foreseeable future.
by Mary Hunt