- In a short sale, a mortgage holder allows the homeowner to sell the home for less than the mortgage amount. Popular in areas where home values have plummeted, short sales are attractive to lenders who want to avoid being saddled with real estate with expensive upkeep costs -- and a slim chance of selling.
- A short sale is much less destructive to credit reports than foreclosure, which is often the short sale's alternative. Most lenders will report a short sale to credit bureaus as satisfied debt, whereas foreclosure is reported as discharged debt, or debt that has been written off.
- Sometimes lenders report short sales as a settlement of debt for less than the amount owed. While not as disastrous in credit terms as a foreclosure, "such a designation is a negative mark on your credit report, though it wouldn't hurt your credit as much as a foreclosure would," says Bankrate.com's Tamara E. Holmes.
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