The sad myth that doing a short sale is somehow better for your credit score than a foreclosure. It was just depressing to see the myth repeated again Sunday at redding.com:
“Remember, it is less damaging to your credit to short sale than to foreclose.” So writes the real estate agent quoted as a columnist with presumed expert advice.
I’m not a credit score expert. But that statement is just not true, according to all the information I have read, and the credit score experts to whom I have spoken.
This quote is from About.com:
How is a Short Sale Seller’s Credit Affected?
Fair Isaac released a report that says credit scores are affected about the same, whether a seller does a short sale or foreclosure. Fair Issac says the average points lost on a FICO score are as follows:
30 days late: 40 to 110 points
90 days late: 70 to 135 points
Foreclosure, short sale or deed-in-lieu: 85 to 160
Bankruptcy: 130 to 240
Quoted below is the CreditSesame site:
Effect of Short Sales On Credit Scores
The problem with short sales isn’t so much the short sale, it’s how they’re being marketed and represented by some real estate professionals as being a better for your credit than a foreclosure. Despite the what you may hear, a short sale is not better for your credit scores than a foreclosure. They’re not better for your credit scores than a forfeiture of your deed in lieu of a foreclosure. They’re not better for your credit scores than a strategic default. Fact is: short sales impact your credit in the same manner as a foreclosure, deed-in-lieu, or a strategic default would.
Too bad our our local newspaper perpetuates the self-serving myth as though it were good advice. It’s been pointed out to the RS that there is an inherent conflict of interest in publishing unverified short sale advice from a real estate agent. The agent only makes money by doing short sales. Going to foreclosure = no agent commission money. That gigantic conflict of interest is nowhere disclosed. The myth lives on. Thanks for nothing, RS.
“You can safely ignore that Check Engine light,” writes the new tow truck columnist.
“Don’t stretch before lifting heavy objects,” advises the new Chiropractor columnist.
There are many good reasons a short sale can be preferable to a foreclosure. But I believe short sellers are too often deliberately misled about the financial implications and consequences of either foreclosure or short sales by real estate agents who are only interested in their commissions. Too bad that source of “advice” is given credence by our only local newspaper. Do your own research before deciding to do a short sale. And consider the source before taking financial advice from hungry real estate agents.