What is a Short Sale?
Definition of a Short Sale: Selling your property for less then what is owed to your
lender(s).
Is a short sale legal? Yes. You can legally sell your house for less then what is owed to
your lenders.
Does your lender have to accept a short sale? No. You need to have your short sale experienced real estate professional contact your lender prior to engaging in a short sale. Many times there are necessary steps to take prior to doing a short sale. It is up to the lender to decide if your financial position is adequate for doing a short sale or if your property is located in a declining market area or a demographically challenged area. Many times it financially lucrative for a lender to accept a short sale VS a foreclosure because they can retrieve their monies from global insurance companies and the government.
What are the legal and tax consequences of a short sale?
If your property is your principle residence the IRS waives the debt up to $250K for single and $500K for married.
If your property is not your principle residence there will more than likely be legal and tax consequences depending on what state you live in. You should contact a Real Estate attorney or Real Estate Tax professional with your questions.
SHORT SALES
- A short sale prevents the Foreclosure from targeting your current credit report and credit history. It will allow you to quickly rebuild your credit and purchase a home in the future without destroying your credit.
- Banks/lenders accept a short payoff on the amount owed to them. This loss is deferred from taxable income for principal residences under the Mortgage Forgiveness Act of 2007 H.R. 3648. It is extended to December 31 2012. It allows a Federal Income Tax Free cancellation of debt income from qualified principal residences indebtedness, which is the debt that was used to acquire, build, or improve the tax payer’s principal residence and that is secured by that residence.
