Why Short Sale

Why a Short Sale?  Evaluate whether or not a short sale is your best option.  Answer the following questions to determine if you are a good candidate for short sale?

1. Have you tried to modify your loan and were unsuccessful?
2. Are you currently behind or soon to be behind on your mortgage?
3. Have you lost a job or had a reduction in income?
4. Are you going through a divorce or death of a spouse?
5. Have you had unexpected medical emergencies?
6. Have you been renting your house and lost your tenants?
7. Have you had a job relocation or have excessive travel to work?
8. Do you have another type of hardship that prevents you from affording your monthly morgage?

If you answer yes to any of these questions then a short sale may be an alternative to foreclosure for you and your family. Here is some information to consider on short selling your home versus foreclosing on your home.

CREDIT:

Most people think of their credit rating when deciding whether to Short Sale or Foreclosure. The biggest factor in credit will be the ability to get another home loan in the future. Currenly lenders favor a short sale versus a foreclosure when determining whether to lend. Fannie Mae has guidelines that allow those who Short Sale to re-purchase a home in a shorter amount of time that those who have a foreclosure on their credit. In addition a foreclosure stays on your credit for 10 years. A short sale typically just reports that account was settled or paid for less than amount owed.

LOANS NOT PROTECTED BY FORECLOSURE LAWS:

Arizona has very liberal consumer protections for those who lender forecloses on them. However, only the original "mortgage" is protected under these laws. Let's face it, most people have refinanced and pulled money from their homes. These loans ARE NOT protected and most lenders attempt to recover their losses on these loans. This ultimately forces lots of homeowners into bankruptcy after foreclosure only adding to their stress and credit issues. When attempting a short sale this gives you an option to negotiate with the lender to either release you entirely from that debt or negotiate more favorable terms on the amount owed to them. You could end up only pay 8% to 10% of your entire balance owed after the short sale. 

TAX IMPLICATIONS:

First and foremost, I am not a tax professional and we encourage you to consult with your tax advisor prior to attempting a short sale. When a creditor or lender writes off debt owed to them they issue a 1099 to the debtor at the end of the year. That 1099 is TAXABLE INCOME to you! There are some protections in place right now for primary home owners. These are temporary protections so once again TIME IS OF ESSENCE! In addition, speak to your accountant about insolvency, losses (for investors), and the Tax Forgiveness Act of 2007 to see if they apply to you. However, the less the bank writes off the less you are 1099'd at the end of year. A short sale typically nets a bank more than a foreclosure so the loss could be less if you short sale versus foreclose. How do I know this? If a short sale is not more profitable than foreclosing the bank will NOT approve the short sale. Their bottom line is key in getting short sale approval. If they can get more in a foreclosure, they will foreclose.

RESPONSIBILITY:

Last, but not least, it may be more responsible for you to short sale than foreclose. A short sale means you are upside down. However, you list the home just as your would if you were making money from the sale. The only difference in this transaction is that the bank has final approval authority. Your neighbors will be grateful for not be getting another unmaintained foreclosed home on their street and you will be attempting to get the highest and best price from a short sale to help stablize prices. Let's be part of the solution and not part of the foreclosure problem.