Short sales are a good alternative for homeowners who owe more on their home than the underlying mortgage and are unable to pay the monthly payments. If you have applied for a Loan Modification from your lender and still cannot get your head above water; then this is a better alternative than foreclosing on your property.
Foreclosures can be stressful and have a devastating effect on your credit. Walking away from a property does not mean that the lien holder will not pursue a judgment against you and it may eventually come back to haunt you down the road.
A Short Sale is an alternative to foreclosure proceedings and undoubtedly the lesser of two evils. You are basically selling the property at a loss under an agreement with the lender. Typically there is some debt forgiveness involved and at the end of the sale you get to move on with your life without the impending doom of foreclosure or a bankruptcy blight on your credit that could follow you around for 7-10 years.
If you qualify under the Home Affordable Foreclosure Alternatives short sale program you may receive financial assistance of $3,000 to help with relocation expenses after the sale is completed.
The first step for the homeowner is to hire a qualified real-estate professional who specializes in short sales. They will help you negotiate with the lender and set an appropriate listing price for your property, market it, and get it sold. They will also help you put the short-sale package together, negotiate the contract with the buyers, and work with the lender to make sure that everything goes smoothly.
The amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012 if it is their primary residence and they used the funds they borrowed to purchase or renovate the property. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
If you need help with a Short Sale or have any questions I am always available to help.