Tax and Legal Updates

Short Sales Facts and Myths

SHORT SALES 101 - "FACTS AND MYTHS"

Everyone is talking about Short Sales, but do you really know what is involved with a short sale?  What do you need to know when working with a buyer or seller on a short sale?  Who can you turn to for assistance with a short sale?  Read on to have some of your questions answered...

Let's start with the basics, what is a "Short Sale?"  A Short Sale is the process by which the Lender agrees to accept less than what is owed under the mortgage and generally releases the borrower from further liability.

What are the general requirements for a short sale?

• Default under the mortgage
• Property listed for at least 3 months
• Hardship of the borrower
• Tax returns or financial statements for 2 or 3 years
• Contract for Sale and Purchase with an arms length Buyer

What are the benefits of a short sale?

• Debt forgiveness / no possibility of a deficiency judgement
• Impact on your credit rating vs. foreclosure
• Possible tax consequences - Mortgage Forgiveness Debt Relief Act of 2007

What are the potential pitfalls of a short sale?

• Possible tax consequences on investment property or second home
• Implication on loans involving mortgage fraud
• Time requirements due to foreclosure proceedings
• Sale must be to an arms length Buyer

Are there Foreclosure Defense Benefits?

• A defense extends the process significantly
• Stay in your property until you are evicted by the Lender
• Allows sufficient time for the short sale process

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