Learn About The Short Sale Option For Your Home

The numbers are only getting worse, according to The Center for Responsible Lending, every 13 seconds one house forecloses in the United States.  So far this year California has the highest foreclosure rates in the nation, since January 01, 2009  more than 196,000 homeowners have lost their home to a foreclosure, seconded by Florida by more than 179,000.  Foreclosure is one step before bankruptcy, which is considered your last resource, but before a foreclosure you have the short sale option.

A short sale is the sale of your property for less money than what you owe the bank, if the lender (bank) agrees to sell your home in short sale, usually the rest of the debt gets forgiven, in this scenario everybody wins.  The seller gets out of high mortgage that he/she can no longer afford, without having to get to the last resource (bankruptcy), the buyer buys a house for less that what the price tag says and the lender takes a minimal loss that if the property was to foreclose. 

Foreclosure is an expensive business for lenders.  A foreclosed property would have to be sold for less money than it’s worth, in the sale process of a foreclosure, the lender needs to pay for maintenance of the property and any other expenses that derive from keeping the property while in the foreclosure market.  This is why lenders favor short sales better than foreclosures.

Short sales have their own impact in the seller.  Most of the time the lender will report a short sale, to the credit bureau, as a satisfied debt, but in other instances, the bank might decide to report it as a settled account, which can have a negative impact on your credit score.  Keep in mind that a foreclosure is worst than a short sale for the credit bureaus. 

Before you decide to short sale your property experts advice you to consult your accountant as you might be taxed on the amount of money that was forbidden by the lender.  For example if you owe 550,000 dollars in your property and the bank approved you to short sale it for 475.000, the lender might send you a 1099 for 75,000, this amount can be considered income, therefore, if you don’t meet the IRS’s criteria of insolvency at the time the debt was forgiven, you would have to pay taxes on those 75,000 dollars.  There are instances were you might be exempt from paying taxes on this 75,000, that is if at the time of the original purchase you put 20 % down.  Again, it is important that you consult a CPA or a tax attorney before you decide you sell your house in a short sale.

25 % of Californians have been unemployed for six months or longer, the numbers as not much different nationwide, the high unemployment rate in the nation has had a collateral effect on the housing market leaving homeowners with no other option than foreclosing on their properties or selling them in a short sale.  This explains why in the United States one house goes to foreclosure every 13 seconds.