Three Consequences To A Short Sale
What Is A Short Sale… A short sale is when a bank agrees to accept less than what is owed on a property.
Are There Any Consequences? Yes. Here are a few potential consequences…
1. Your Credit Will Be Damaged. The question of how bad will depend on how it is reported to the credit bureaus by the lender, how long the short sale takes, and how the credit regulations change over time. However… Assuming you keep paying your other debts on time, the damage could be as minimal as 50 points.
2. The Bank May Ask You For Re-Payment Of The Deficient Amount. As banks are losing money on each short sale that is being processed, it is not uncommon for them to request repayment of the amount they are being shorted or a percentage of the amount. However, the new HAFA program requires that lenders completely forgive the amount shorted throught the first trust.
3. You May Have To Pay Taxes On The Deficient Amount. You will have to file taxes on the amount forgiven by the bank. Understand that uncle sam views the forgiven debt as free money (aka… un-taxed money). However, MOST people qualify for an exemption on this liability through the debt forgiveness act that goes through 2012. Check with your tax advisor.
Short Sales are a great option for those with financial hardships and need to be free from their current mortgage. To discuss this is greater detail contact me.
