Short Sale: The Promised Land?
In 2012, foreclosure sales and “short sales” together accounted for 43 percent of all U.S. residential sales. While foreclosure is a term often slung around on the news, the term “short sale” is lesser known. A short sale can help underwater homeowners, but short sales carry some inherent risks.
What are short sales?
A short sale is the sale of real estate in which the house is sold for an amount of money that is insufficient to pay off the homeowner’s existing debts on the property. Consequently, the property owner cannot pay the full debt, but usually, the lender will agree to accept less than the amount owed on the debt. Generally, the goal of a short sale is to have the bank forgive the deficiency, relieving the homeowner of the debt on the property.
What are the upsides of short sales?
A short sale is often used as a last resort in the face of foreclosure, which is the legal process used by lenders to enforce payment of a mortgage. Unlike a foreclosure, a short sale allows the homeowner more time to find alternate living arrangements. Foreclosures can be damaging to a borrower’s credit history, but short sales can have a lesser impact if reported properly to the bureau – thus, short sales, in some cases, are better than the alternative.
What are the downsides of short sales?
When a short sale occurs, the borrower can be liable for taxes to the IRS on the amount of the forgiven mortgage balance. In addition, when short selling, the homeowner has to list the home for sale, find a buyer to do the short sale, find a realtor, and get the lender to agree. A borrower/seller with a high-paying job or many assets might have a more difficult time getting a short sale approved.
If you think that short selling might be a good solution after considering all the pros and cons, contact a knowledgeable Charlottesville real estate attorney. Your attorney can help you evaluate if a short sale might be a viable solution and, if so, assist you with the complex legal issues you might face.