Free Advice From Your Local Nonprofit
A foreclosure is significantly more devastating to your credit than other alternatives, let us help you better understand the process.
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Don’t walk away because you don’t understand the process or feel discouraged about your situation. We understand the frustration and uncertainty that comes when faced with foreclosure and will work with you to understand your situation and help find a resolution. As a nonprofit, we often have knowledge of resources, not readily available to the public, that may benefit you and will work to determine what options are best for your unique situation.
What is a Short Sale?
For homeowners facing foreclosure, short sales are a beneficial alternative. For a troubled homeowner, a real estate short sale is a consent from their bank allowing them to sell their property at an amount less than that due on their mortgage loan. It offers an optimal alternative to foreclosure, saving the banks the expense and hassle of the foreclosure proceedings and relieves the homeowner of responsibility over the property with considerably less credit damage than foreclosure.
What are the advantages of a short sale vs. foreclosure?
The main advantage of a real estate short sale is preventing foreclosure. Short sales are considerably less damaging on credit ratings than foreclosures. Remaining on your report for up to 7 to 10 years, a foreclosure is often times deemed as damaging as bankruptcy, and may cause you to wait up to 3 years to re-qualify for a home loan at a sensible rate. Short sales may report on your credit for up to 3 to 5 years however, are noted as “paid in full” with a “settled for less than owed” and are spared the more harmful FORECLOSURE marks.
However, because a short sale allows the homeowner to sell their property for less than the outstanding mortgage debt, it may cause a “deficiency”, written off as a forgiveness of debt by the lender. In some instances, that deficiency can be considered taxable income that the seller may be taxed on. We highly recommend to seek the advice of an attorney or your CPA and not rely on this information to make final decisions.
Visit our Foreclosure Law section for more IRS and liability information.
The information contained herein is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, We highly recommend seeking the advice of an attorney and not rely on this information to make final decisions. We are a HUD approved nonprofit housing counseling agency, therefore, we are not qualified to provide legal and/or tax advice. We are not licensed as a lawyer nor a CPA and cannot advise concerning IRS consequences. While NPHS strives to keep the information on the web site accurate, complete, and up-to-date, NPHS cannot guarantee, and will not be responsible for any damage or loss related to, the accuracy, completeness, or timeliness of the information provided. Opinions expressed herein are solely those of the contributors or authors and do not represent an endorsement or corporate position of NPHS unless otherwise noted.
