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Arizona Short Sales, Credit and the Aftermath

by Charlie Allred

Recently, I met with one of my clients to discuss the aftermath of his recently completed Arizona short sale in the Chandler area 85225. As we were discussing the options to help boost his credit while waiting to purchase a new home his credit score became our main topic of conversation.

His lender was Aurora. Aurora is very receptive to the Arizona short sale process and works with their mortgage holders, the only downfall is that they take 90 days to complete start to finish.

My client had an extreme hardship so he was unable to make his payments for six months prior to meeting me; so once we completed the successful short sale he missed nine months of payments. From my experience here at SRE, we have found that what affects a mortgagee’s credit the most are the missed payments and he knew this information going into the sale. The lender will keep reporting the 30, 60, 90 and 120 day late payments to the credit bureaus as the days keep adding up. So, my client, in essence, missed roughly 270 days of payments.

As we were discussing his credit score he informed me that it had only dropped about 75 points. I was shocked! He missed 270 days of payments and his credit was not as low as we both had anticipated. At this point, based only on his credit score, he would still qualify for an FHA loan!!! We met only two weeks after the completion of the short sale, so the recording of the sale was not yet reported on his credit report.

The reality for Arizona homeowners is that the housing bubble burst. Many people are still upside down on what they owe on their home versus what the home is currently worth. Because Arizona home prices went up astronomically during the boom, it only seems logical that the prices will drop just as fast in this market. We must face today’s reality that our housing market is one of the worst in the nation. There are many people that can ride out struggling to make their payments with a 7% interest rate, but if you can not make ends meet, there are other options and maybe short selling your home is one.

In the end, my client is very pleased with his current credit score- he will continue to improve it and when he can purchase again in two years he will be more than qualified. He could have stayed in his home throwing away $1500 a month only to wait 10-20 years for his home to be worth what he originally paid. Now he is able to buy a new home in two years for the market rate and will not be waiting for the prices to stabilize because he purchased at the right time. There is life after a short sale and sometimes it makes more sense to cut your losses now (in this case your home) to get ahead in the future.

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Charlie Allred September 8, 2010 at 2:07 pm

Great info Kelly! This is probably one of the big mysteries of short sales! I’m so glad to hear the late payments didn’t hurt your client’s credit very badly. With his current credit score he would normally qualify for a new loan- however, he had the late payments- she he must wait 2 years.

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