Question: Can you give me some direction please. I want to do a short sale. Is it better to stop making payments or continue making payments until it is sold?
Answer: If you elect to continue making your payments, you will be better off in the long run. The impact on your credit scores will not be as severe. You will not have any late payments during the process. We did have a client who went through the short sale process and paid all his payments and was able to purchase another home about a year later. His credit scores dropped but not to the point where it took years to bring the score back up. It is recommended to keep paying your mortgage payments while going through the short sale process. If you choose to stop making your payments, then you will soon have a “Notice of Default” sent to you. That will likely take about three months. You will be going down a path that could lead to a foreclosure before you can accomplish the short sale. At the same time you will see your credit score start dropping due to the failure to make mortgage payments. The short sale will impact your credit score further and you will not likely be able to purchase a home again for two or three years. The other part to consider is you will need to find replacement housing. In most cases the answer is a home to lease. The landlord is interested in your FICO scores in making the decision to agree to lease a property to you. Landlords understand there are many people struggling in today’s market and have to sell their homes in adverse circumstances. However, the landlord is more likely to lease to someone who has kept up with their payments during the short sale than a person who has not (credit scores help tell that story). The decision to sell your home as a short sale is a difficult one and painful to those involved. Many people never expected to be in this kind of situation. It is better to direct the process than to let the process direct you. Which means a short sale is better than a foreclosure. The pain in our current economy has affected millions and at this time of the year it is even more painful.