To close your property the taxes have to be prorated until closing. These costs are your responsiblity for as long as you own the property. A short sale is when the lender authorizes the sale indicating that the lender will accept the short fall as a loss. Thus if you have 100000 mortgage total debt including taxes and insurance and when the short sale is authorized net proceeds are 85000 . This leaves a short fall of 15,000. The bank allows the sale to close short these funds being a payoff less than full/settled amount.
Depending on the banks policy,the bank may after the short fall via a defeciency judgement other banks may just process the payoff as a settled account. Both effect your credit report but a short sale is looked more favorable than a foreclosure.
If you want more information about foreclosure/credit issues/short sales and modification please check out my web site.
First Weber Group
Certified Distressed Property Expert
Metro Milwaukee... more