How does a short sale affect the credit of the borrower?
A. There are as many opinions about this question as there are attorneys. When a borrower fails to pay his loan as agreed and falls 30-60-90 days behind he is considered in default. When the lender files a “Notice of default”, which is recorded with the county recorder, this begins the foreclosure process. At this point, the majority of the damage to ones credit is done. It is actually considered a positive step if the borrower sells the property. The credit scores will recover faster, with a loan “settled for less than was owed” than it will with a completed foreclosure.
