Q: My daughter in California owns a home that is worth less than her mortgage. Should she see if she can do a short sale for her home? If she does this and wants to buy another house closer to us will having a short sale on her credit history hurt her ability to purchase another home?

A: A short sale will definitely have a negative impact on her credit and she may not be able to buy another house for a long time. There are some rules in place at the moment that if someone has a short sale or foreclosure on his or her credit, then that person cannot buy a home using a loan that would be sold to Fannie Mae or Freddie Mac for five years. Since many, if not most, residential loans today are sold to Fannie Mae or Freddie Mac, she would probably put herself in a bind with a short sale.

Completing a short sale is no easy task. If your daughter can find someone to buy her house, she will have to get the lender(s) to agree to the short sale.

Although you live in California where real estate attorneys are not generally used to close residential house deals, I always advise hiring your own attorney (which is different from the one hired by the lender) to walk you through a short sale or foreclosure. There are some issues that could come back to bite you if they’re not resolved at the closing.

Jan. 19, 2009.