Going thru a financial setback is very tough, and we are here to help you. If you are no longer able to make your mortgage payments because of a financial or personal hardship, then a short sale can help you avoid foreclosure, and it is less detrimental to your credit than a foreclosure or a bankruptcy. A short sale occurs when the net proceeds from the sale of your property do not cover your obligations including the total of all liens, costs of sale, mortgage payoff, property taxes, transfer tax, and commission, etc.
The process of selling your home as a short sale is similar to what you went through when you purchased the property and obtained a mortgage. You probably met with a lender’s representative and had to provide them with lots of documentation that supported the fact that you could qualify for the mortgage. With a short sale, we are now doing the same thing in reverse.
When the lender or bank forecloses on a property and sells the property for less than what was owed, a deficiency exists with the loan. The deficiency is the difference between what the homeowner owed and the sale price of the property. Because of this, we will facilitate with the lender not to seek a deficiency judgment against you. There is a second issue as it relates to the deficiency and the infamous 1099. When you complete a short sale, the lender will report that loss to the IRS. If this is your primary residence, the IRS cannot tax you on the deficiency prior to 12/31/2017, unless the law is extended beyond that time frame. It is obviously in your best interest to be proactive and consider a short sale NOW. At least there is a chance that you can realize a favorable outcome.
The big key here is to avoid foreclosure. By nearly any measure, a foreclosure is the most damaging event a credit status can encounter – worse than bankruptcy. In the course of getting your short sale approved, you may miss your mortgage payments, and these will show on your credit. By avoiding foreclosure, you will likely be able to resume normal borrowing (car loans, credit cards, consumer goods, and such) relatively quickly. Your credit will recover much quicker from the credit dings of a few late mortgage payments, if you keep your other accounts current. Always stay on top of your consumer credit and consider allocating your funds to meet necessities (food, utilities, household needs, auto expenses, etc.). Beyond paying for necessities, plan to pay other bills and keep as many accounts as current as possible.
A short sale may be just one part of a larger effort to get through a tough period. We want to help make it possible for your credit to recover quickly. Please seek legal and/or financial advice so that you fully understand the impact and its process.
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