What Is A Short Sale (of a house):
A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a Short Sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. Documentation to the lender must be submitted before the lender will accept the terms of a Short Sale. By accepting a Short Sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. The seller maintains ownership of the property till the property is sold. But, the lender now has final say whether an Agreement of Sale (price and terms) is accepted on the property.
For the Seller, the process may get them out of their mortgage liability without facing bankruptcy or foreclosure, which is better for your credit. In most cases, but not always will this process show up on your credit report reading "debt is satisfied." This language will serve you better and may keep your credit intact. This is an important question for your lender as to how they will report the Short Sale on your credit. The lender may issue a 1099 for the forgiven amount on the loan, which you would have to pay taxes on. There are two possibilities that may save you from paying taxes on the forgiven amount. Refer to the IRS website to see if you have insolvency at the time the debt was forgiven or if your home loan is a nonrecourse loan.
Call us 609-967-7950 or email us for more Information
For a Buyer the process can make a lengthy home-buying process longer and more arduous, but it may be worth it. The property may be sold under value, thus obtaining the property at a reduced price, but ths is not always the case. Most cases banks are trying to sell the property at market value to recoup their loses.