What is a Short Sale?

A short sale is when a seller owes more money to the bank on a property than the sale proceeds will cover and is unable to continue making mortgage payments. A lender may agree to a short sale, agreeing to accept less than what is owed. In order for a short sale to be agreed upon, the homeowner must provide a hardship situation to the lender.

SHORT SALES vs FORECLOSURES

Foreclosure

• Can do irreparable damage to the Homeowner's credit
• Will prevent the Homeowner from obtaining another home loan for quite sometime
• Negative reporting stays on credit 7 to 10 years
• May interfere with renting
• May face a deficiency judgment. Which means a borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage in full. This judgment could attach as a lien if and when the Homeowner buys or sells other property
• May face tax liability if the lender chooses not to record the dificiency judgment of which they have the option to write-off the loan and issue a 1099 which the Homeowner will pay taxes on

Short Sale

• Avoid foreclosure on your credit
• Internal Revenue Service frequently deemed the difference between the mortgage balance and the amount realized from the Short Sale to be taxable income despite the fact that the debtor never saw a dime of it. There is a new federal legislation called The Mortgage Forgiveness Debt Relief Act of 2007 that took effect on January 1st, 2008. The new act essentially eliminited this problem
• Allows Homeowners a better credit score
• No feeling of eviction
• Allows Homeowner more time and flexibility to find a new place to live

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