If you are behind on your mortgage payments or suffering from high mortgage debt, you may have been advised to offer your home for a short sale. Although a short sale has many benefits, it is not always the most advantageous solution for every homeowner. Here are some basics to help you decide; a foreclosure attorney will also be able to offer good advice.
Short Sale Basics
A short sale is simply selling your home for less than the balance owed on the home’s current mortgage or mortgages. One of the most highly touted benefits of this method is that it is much better for your credit score than a foreclosure would be. However, this is not always true, so consult a foreclosure attorney to help you decide whether this route will be best for your credit going forward.
In addition, the short sale does not automatically free you from the debt burden of your previous mortgage. The mortgage creditor must agree to forgive the remainder of the amount owed on the debt after the sale, and many lenders offer alternative promissory notes instead, resulting in a different kind of debt, but not in the forgiveness of the mortgage debt. A foreclosure attorney will be able to guide you to the most advantageous arrangement with your creditor.
Finally, you may owe taxes on the deficiency of the mortgage after the short sale. The IRS treats the property sale and the related debt forgiveness as income/profit for tax purposes, and so you may find yourself saddled with high tax debt after the sale, even if the loan balance is forgiven.
A foreclosure attorney is your best guide in the complicated world of foreclosure and its many alternatives.