This basically covers why anyone trying to avoid foreclosure via the short sale route is screwed either way...
A short sale of real estate happens when the owner of the home or property owes more on the property than what it sells for.
This can happen when a home owner chooses to sell when property values have dropped drastically or when an owner has taken out equity loans on top of the mortgage loan and the loans equal more than the value of the home.
A short sale can also occur when a homeowner is forced into foreclosure and the bank sells the house for less than the amount still owed. In any case, when all is said and done, the owner comes out owing money instead of earning a profit after the sale of the property.
The credit implications for a short sale are very different for those voluntarily selling their property and those forced into foreclosure.
If the short sale is due to foreclosure, the property owner's credit could be negatively and severely affected.
Often, the bank chooses not to sue, but to take the loss as a tax write-off. In this case, there would be no deficiency judgment on the homeowner's credit report; however, there is another implication. The $30,000 that the homeowner did not have to pay would be considered by the IRS to be income.
January 31, 2007
Get familiar with the term and terms of the "Short Sale". You're gonna be hearing that one a lot now
Posted by blogger at 1/31/2007