What is a Short Sale?
Having closed more than a hundred short sales, we have answered lots of questions about short sales. Many people wonder what a short sale is and why a bank would agree to a short sale.
A short sale is basically when you owe more than what the home is worth and the bank agrees to take less than what is owed on the mortgage and accepts is as payment in full. The bank agrees to these terms because they will receive more money from a short sale than they would if the home went to foreclosure.
Credit Consequences Of A Short Sale?
Many people want to know if they qualify for a short sale. The truth is, if you owe more than your house is worth you qualify for a short sale. The banks will ask what your hardship is, but ultimately the bank will agree to a short sale every time if they will get more money from the short sale than they would from foreclosure.
Hardships can include divorce, job loss, relocation, salary cuts, medical bills and more. In the end, the bank is simply looking at whether or not they will recoup more money from a short sale than they would from foreclosure.
If you are underwater, you qualify for a short sale. With new short sale programs, you simply fill out a check box to declare your hardship. Contact us today for help with your short sale.
Tax Consequences and Short Sales
There are tax ramifications with a short sale and a foreclosure. Lots of people believe that there are no tax issues if your home goes to foreclosure. However, this just isn’t true. Many times the tax liability is larger with a foreclosure than with a short sale. In either case you will receive a 1099.
There is good news though. In most cases you will qualify for the Mortgage Debt Relief Act which allows your tax liability to be forgiven. We would encourage you to do a little research or contact us today for more information about your options to avoid foreclosure.
Credit Consequences and Short Sales
We get questions on a regular basis from homeowners that are wondering how a short sale will impact their credit. The good news is that a short sale will have far less negative impact than a foreclosure. When you consider a short sale vs. foreclosure, you will see the word “FORECLOSURE” on your credit report. That ‘F’ word will have an impact on getting a credit card, a car loan, or another home loan.
Perhaps most importantly, the short sale process allows the homeowner to purchase another home in as little as two years. With a foreclosure, you’ll have to wait at least seven years. Furthermore, getting into the real estate market in just a few years will allow you to take advantage of the low market and build equity in your new home.
