BEST ANSWER
Here we go:
A short sale is a sale between homeowner (seller) and a buyer, that is approved by the lender. As in most cases the sale price might not be enough to pay of certain liens, taxes and mortgage, you need to get approval from these parties concerned.
It is quite a lengthy and time consuming process, but the beauty of it is that the lender and other lien holders will forgive you the difference between what is owed and the proceeds. And not only will they forgive the difference, but in most cases they will waive deficiency judgment so you won't be pursued for anything owed. You basically walk away free.
You might get a 1099 for the forgiven amounts, but if it is your primary residence you wont get taxed on it if it is an investment property then you need to consult a CPA.
You can stay in your home as long as the process of the short sale is ongoing and the lenders will stop calling you as frequently because your file will move from collections to loan mitigation.
So basically, nothing but advantages. I do agree with Dennis in the fact that you have to make sure that the person handling your case knows what he is doing.
But in today's market, where everybody is upside down, it's your best bet. I call it "the people's bailout !"
Christian Bohyn
Realtor - Mortgage Broker
Specialized in Loan Mitigation
Tue Jun 2 2009, 14:37
Fair Housing and Equal Opportunity