A short sale affects your credit, but the damage is smaller and shorter-lived than a foreclosure.
According to legal data compiled by foreclosure attorneys in Washington, a foreclosure can lower a credit score by 150 to over 300 points, and the record stays on your credit report for up to 10 years. A short sale typically drops a score by as little as 50 points if your other payments stay current, and the impact often fades within 12 to 18 months.
Here's the part that matters most in Washington: how your loan gets reported afterward depends entirely on the language in your short sale approval letter. If the lender agrees to report the loan as "paid" or "settled," your recovery timeline is faster. If they report it as "settled for less than owed," it carries more weight against you.
This is why the approval letter itself, not just the sale, determines your outcome. Before you sign anything from your lender, that document needs to spell out exactly how the debt will be reported and whether the remaining balance is forgiven.
Washington is a non-judicial foreclosure state, and lenders generally cannot pursue a deficiency judgment after that process. But a short sale is a separate transaction, and unless your approval letter expressly waives the lender's right to collect what's left owed, they can still come after you for it later. That single clause is the most important sentence in the entire package.
We review this with every homeowner before a short sale moves forward.
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