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What Exactly Is A Short Sale?
What Exactly Is A Short Sale? A Short Sale is a transaction where the net proceeds from the sale won’t cover your Total Mortgage obligation and closing costs, and you don’t have any other sources of money to cover the deficiency.

When a Short Sale is executed correctly, it is a Win-Win-Win Solution for the Distressed Homeowner, their Lender, and the New Buyer. The Lender will receive the highest Marketable Price while avoiding the higher costs associated with a Foreclosure, the Borrowers Avoid a Foreclosure from being entered onto their credit, and the New Homeowner gets to Purchase a property at Today’s Most Competitive prices. Generally, the borrower also receives relief from possible future legal actions and deficiency judgements.

Short Sales occur when a borrower sells their property for a sales price that is less than the amount that they owe to their lender(s). In order for this to take place, the lender(s) must accept a discounted payoff. This means that the bank gets paid less than the full loan amount owed. In a Short Sale, the homeowner usually receives complete or partial relief from all of their mortgage debt after the sale is finalized and avoids an financially crippling Foreclosure or Bankruptcy on their credit report.

The end result is that you Sell Your Home, Satisfy or Settle Your Mortgage, and Avoid a Foreclosure or a Bankruptcy.

Why Consider a Short Sale vs. Other Available Options?

When facing a Financial Hardship with your Mortgage, there are always several choices to consider. The following sections explain why a Short Sale is often the Best Financial Choice when compared to other choices.
What Happens After the Short Sale Process is Over?
Although a Short Sale is usually the Best Financial Choice, the reality of any of your options is that there may be financial consequences.
  • You may be asked by the lender to sign a promissory note agreeing to pay back a portion or full amount of your loan that is not paid off by the Short Sale
  • Any amount of your mortgage that is forgiven by your lender is typically offset by the Lender issuing what is called a 1099-C. A 1099-C may be required to be considered as income when you file your taxes, and you may have to pay taxes on that amount.
  • On a positive note, a temporary measure was passed in 2007 called the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act. Many Homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012.
  • Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score far less than a Foreclosure or Bankruptcy, and usually does not have the same consequences when applying for credit in the future.
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