Is a short sale a good option for me?
Is your mortgage under water? Do you want to rid yourself of your home but are not sure how you can do it when you owe more than you could ever sell it for, or do you want to make a move before you lose your home to foreclosure? Many Florida residents in your position have utilized the short sale process to sell their homes. Is this a good option for you?
What is a short sale? What are the downsides to a short sale? Should I consult an attorney before pursuing this option?
A short sale is…
If you pursue a short sale, it means you are asking the bank to accept an offer of sale on your home for less than your current loan amount. Say you owe $450,000 but the value of your home is closer to $400,000. If you receive an offer on your home for the $400,000, you would basically have to ask the bank to accept a $50,000 loss and write it off. In other words, it is a debt forgiveness program of sorts. Not all banks are willing to do this.
The good about the short sale program is that it allows people to walk away from their home without losing it to a deed in lieu deal or foreclosure. It can affect your credit score, but the drop you experience should not be as great were you to lose your home in another way.
The bad about the short sale program is that you may have to pay taxes on the amount of debt forgiven — the Internal Revenue Service considers this income. That can quickly add up to a hefty tax bill, one that most people lack the funds to pay.
Ask questions before making a decision
If you are not sure if a short sale is right for you or are wondering what other options may be out there that could help you with your housing and financial situations, it is okay to seek counsel on the matter. The bank is going to tell you what benefits them, and your realtor will not have an array of options for you.
Legal counsel can look at your situation as a whole and may be able to provide you with a variety of options that can benefit your situation or give you detailed information as to how a short sale will actually affect you. Figuring out what to do with your home when you are in a tough financial position can be stress-inducing. With the right assistance, you can figure out the best way to address the issue.