I have a single family rental property that I will probably have to sell short because value is below what I owe the bank. I am current on payments. How bad does a short sale hurt credit and how long does it take to repair?
From what I understand, short sales are just to the left of foreclosure as far as hitting your credit goes. Need to stop making your payments for a long time before the bank will work with you, in general @Jason H. .
What happened to put you in this position?
The rental was my primary residence for 5 years. I couldn't sell it, so I rented it out 3 years ago. I have an interest only loan on it and mortgage is about to increase significantly in January 2016.
Gotcha. Sorry you are facing that. How much underwater are you? Could you post as a sub2 deal to the marketplace here? Some are willing to absorb a little equity/value hit in exchange for terms.
If you are planning on selling short you need to be substantially behind on your payments, and be able to show some sort of hardship for why you can't afford to make the payments anymore. To go along with that you need to prove that you can't make the payments. So if you have a bunch of money in other houses or mutual funds the banks will call BS on you. That said it will hurt your credit pretty bad and you won't be buying anything else for a while, though it is better then a foreclosure.
I applied for a modification that was denied by the lender but they told me I could sell short without being delinquent. That sounded strange to me but if they will allow it I will entertain it. I don't have many other options. The value is only about $20k less than what I owe so it's going to be a close one. I will try to sell for what I owe but I am willing to sell short if I have to.
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