Short sale is an option for people who are struggling to make their mortgage payments by selling the home at a loss. While a short sale will not keep you in your home, it will keep a foreclosure off of your credit report which will allow you to rebuild your credit quicker. In order to short sell your home, you will hire a Miami foreclosure attorney to help you file the paper work to ask your lender to sell the home at a loss. In exchange, the lender will agree to forgive the remaining balance. It seems like a great deal for all parties involved. You get out of a mortgage you cannot afford to pay, the bank gets more of their money back than if they foreclosed and the buyer gets a great price on a home. But, some experts argue that short sales are not the great deal they seem to be. If you are facing foreclosure or looking into short sale, you should always contact a Miami bankruptcy attorney to see what options you might have for your situation. So what problems might you face if you decided to short sell your home?
First, owners who are at risk of foreclosure already have poor credit ratings because they are already several months behind on their mortgages. Yet the News-Press insists that an advantage of a short sale is helping the home owner avoid foreclosure and protect their credit score. However, a disadvantage of trying to sell your home in a short sale is a lender will not agree to it unless the owner is already behind on their mortgage. In fact, the homeowner must be able to prove they are in financial distress before any bank will agree to a short sale. What is the purpose of short selling the home to protect a credit rating that has to be falling to be eligible for a short sale in the first place? It does not make much sense. And there are a few other issues that call short sales into questions.
The housing market is still struggling even several years after real estate agents are not selling very many homes. Since real estate brokers make money only when they sell homes, their profits have plummeted alongside the housing market. Short sales are a way to entice buyers back into the market. So, now more sellers listing their homes for far less money, and in order to qualify with their lender for the short sale, they actually have to let their credit ratings fall or go into foreclosure.
Taxes are another issue that sours the short sale deal. When a home is sold at a loss, the bank will usually discharge the remaining debt. Which means that homeowners who sell short, are usually subject to income tax on the amount of the discharged debt. Because of this tax liability, the seller could end up owing thousands of dollars to the IRS after a short sale.
So, is short selling your home the solution for your financial issues? While that is a decision only you can make, you should always hire a Miami foreclosure attorney to help you assess your situation.
400,000 Short Sales Could Occur in U.S. in 2010, by Michael Kraus, September 27th 2009