Since the economic downturn has caused property values to decrease, many homeowners find themselves in the position of owing more for their homes than their current market value.
A short sale is the sale of a property for a price that is less than what is owed on the mortgage. A short sale occurs when a homeowner can no longer afford his mortgage and wants to avoid foreclosure. The mortgage lender must approve a short sale before it can take place, and will generally do so if it will make more money from the short sale than from foreclosure. While a short sale will affect the homeowner’s credit rating, it does not have as great an impact as a foreclosure, and is the preferable option.
Short Sale Advantages
The homeowner can avoid foreclosure and it’s harsh impact on his credit rating.
Short sale is generally a quicker process than foreclosure.
Financially recovering from a short sale is quicker and easier than with a foreclosure.
The homeowner can remain in the home rent-free until it sells, and the lender may assist with moving expenses.
The lender may forgive any remaining balance on the mortgage, following the short sale.
Short Sale Disadvantages
The homeowner will lose the investment he made in the home.
The homeowner’s credit rating will be negatively impacted.
Lenders are not obligated to grant the opportunity to sell a property through a short sale and may, instead, move straight to foreclosure.
The short sale revenue may be taxed as 1099 taxable income.
For more information on short sales contact us today.
Jones & Jones Law, P.L.
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