WHAT IS A SHORT SALE?
The foreclosing mortgage company is suggesting a short sale.
What is that?
A “short sale” is where you sell your home at the best price possible but at a price which is “short” or insufficient to pay off the mortgage.
In a short sale, you won’t get any money from the buyer because all of the money will be used to pay the costs of selling and most of the mortgage.
Do not spend money on improvements or curb appeal since you won’t get your money back.
To do a short sale, you need to hire a realtor to list your property who understands short sales and has done them in the past. The sales listing will indicate that this is a short sale which will entice bargain-hunting buyers.
If you get an offer, the mortgage company will need to approve the sale price since they will not be paid in full. They will also need to approve the realtor fees. Be aware that it will take time for the mortgage company to review the offer. It is not uncommon for the mortgage company to delay so long that the buyer withdraws the offer.
If you agree to a short sale, make sure that the mortgage company will NOT file a tax form 1099 which indicates the amount the mortgage company lost by agreeing to the short sale.
If they send a 1099 tax form, you might have to pay income taxes on the amount the mortgage company is “short,” and, as indicated above, you will not get any money from your home’s sale to help pay these taxes.
It used to be that agreeing to a short sale was better for your credit than allowing it to go through a full foreclosure. However, the rules recently changed so that a short sale now has the same effect on your credit as a foreclosure.
Our firm can help you determine which option is best for you when you are facing foreclosure. Call us today to schedule your appointment.