What is a Short Sale?
Short-selling a property in default can offer advantages and disadvantages to homeowners facing financial distress.
- Avoiding Foreclosure: Short-selling a property in default allows homeowners to avoid the lengthy and often damaging foreclosure process. It provides an opportunity to sell the property for less than the outstanding mortgage balance, with the lender's approval, thereby satisfying the debt without going through foreclosure.
- Preserving Credit Score: While a short sale can still hurt credit scores, it's generally less damaging than foreclosure. A successfully negotiated short sale can mitigate the adverse effects on creditworthiness, enabling homeowners to recover financially more quickly.
- Control Over the Sale Process: In a short sale, homeowners maintain some control over the selling process. They can work with real estate agents to market the property, negotiate with potential buyers, and explore options to settle the debt with the lender.
- Lender Approval Requirement: Short-selling a property in default requires approval from the lender holding the mortgage. The lender must agree to accept less than the full amount owed on the mortgage, which can involve complex negotiations and may not always be granted.
- Potential Tax Implications: In some cases, the IRS may consider the forgiven debt resulting from a short sale taxable income. Homeowners should know the potential tax consequences and consult with tax professionals to understand their obligations.
- Impact on Future Financing: A short sale can affect homeowners' ability to obtain financing for future home purchases. While it's possible to qualify for a new mortgage after a short sale, lenders may view it as a negative factor when assessing creditworthiness.
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Call me @ 818-414-6744 if you are facing foreclosure. I am a certified short sale specialist and loan modification specialist.