Is A ‘Short Sale’ A Good Idea?

April 2, 2011

General Short Sale Info

If you find yourself upside down on your mortgage due to unforseen circumstances in this terrible housing market you should look into a short sale. A short sale allows you to sell your house for a loss and before the downturn in the housing market banks would rather foreclose. Your lender would have to agree to the short sale and they can deny your request if they choose.

The bank will look at several factors when evaluating your request. Have you lost your job recently? Has there been a death in the family? Have you gotten divorced? Is your home worth significantly less than what you paid for it? The bank will look at all of these circumstances before they make a decision on your request.

When it comes to your credit report a short sale is only very slightly better than a foreclosure and all creditors will be able to tell you sold your home in a short sale. Obviously this is better than being foreclosed. You may also run into a tax issue with the IRS. The IRS may treat the value of your home that is absorbed by the bank in the short sale as income on your end. That would make you responsible for paying taxes on that dollar amount.

The good news is that many lending institutions are willing to work with you on a short sale in this current market. You should look into every scenario before deciding on your path.

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