Due to the current economic conditions, there as been a steady incline in the number of short sales on the market.
So what exactly is a short sale? A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owned by the current homeowner. In some cases, the difference is forgiven by the lender and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.
For homeowners facing a foreclosure situation there is huge benefit to undergoing the short sale process. It allows the seller to avoid the credit report damage associated with a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet. A foreclosure can stay on your credit report for up to 10 years and can take an emotional and financial toll on you and your family.
There are some pitfalls associated with the short sale process and should be considered. The I.R.S. may consider any debt forgiveness as taxable income, thus resulting in a tax liability. In addition, lenders can often pursue a borrower for the deficiency balance (the difference between the amount owed and the amount paid).
In some cases you may be able to avoid taxation if you can prove you are insolvent. But if insolvency is unsuccessful, and you are faced with a tax liability resulting from the deficiency amount, it may make more financial sense for you to let the lender foreclose.
The short sale process can vary, but it will generally work as follows:
Due to the amount of documentation involved in the short sale process expect to wait for lengthy periods of time for the entire process to be completed. However, if done correctly, it can work well for all parties involved.
If you are considering a short sale in Lake Mary | Windermere | Heathrow | Sanford and the Greater Orlando area, contact Karen Arbutine and Associates today at 888.727.7778.
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