Mortgage short sale or bankruptcy?
July 9, 2012 | 11:00 am
(Updated: July 2, 2012 | 5:06 pm)
Stagnant real estate values in recent months in many areas across the country have homeowners everywhere continuing to feel anxious about homeownership, some are in a position in which they want or need to sell, while others may be in danger of losing their homes.
Listen, it’s quite possible the real estate market has hit its peak for 2012 and waiting for higher values is an exercise in futility ~ ignoring the situation will only make matters worse.
One viable option if you’re not able to wait indefinitely to sell, or if you’re facing foreclosure, is to go through the process of a short sale ~ if you’re facing financial hardship and just can’t seem to keep up, this may be your option to bankruptcy… eliminate your largest debt.
A short sale procedure can be used to sell a home when its value has dropped well below what you owe on it. Put more simply, in order for homeowners to consider the process of a short sale, the home’s value must be lower than whatever is owed on the mortgage.
In order for a short sale to happen, a mortgage lender must agree to reduce any outstanding debt so that a home may be priced to sell as close to its assessed value as possible.
What motivates the lender to do this? The lender does not want to own abandoned, vacant properties… they are in the loan business, not the real estate business.
There are several consequences involved when it comes to short selling a home;
1 Even though going the short sale route allows homeowners to pay off outstanding mortgage debt, one consequence is that they will also walk away with nothing to show for investment made in the property.
2 Money that was paid as a down payment or toward home improvements will be lost. A short sale allows homeowners to wipe their mortgage debt clean, but it also wipes away any chance of recovering money that was put into the home.
3 Another downfall to short selling is that the process will affect a person’s credit. Some people mistakenly believe that a short sale will prevent negative marks from showing up on their credit report. This is a falsehood ~ if you’re late on mortgage payments, you receive negative marks on your credit report. Although a short sale is not as detrimental to a person’s credit as a foreclosure, it will show up on a credit report. Buying another home in the future will be possible, but the process may be more difficult.
4 Finally, there is a chance that the lender may file a 1099-C with the government reporting a debt cancellation. This can subsequently lead to the homeowner owing taxes on any amount forgiven.
Opting to short sell is a great way for homeowners to avoid the long and unrealistic process of trying to sell a home for more than it’s worth or, even worse, of going through foreclosure. However, the process does not come without its own set of consequences that homeowners need to be aware of before considering this procedure.
The real estate agents at www.GayRealEstate.com and www.LesbianRealEstate.com are well versed in assisting sellers with analyzing their options for selling, including a possible short sale. Choose an agent online today or call GayRealEstate.com Toll Free at 1.888.420.MOVE (6683).