How a Short Sale Works
A short sale occurs when homeowners sell their homes for less than what they owe in their mortgage in an effort to stop foreclosure. Short sales, which must be approved by the lender, are a way for the lender to avoid the costly process of foreclosure. A short sale is also a way for homeowners to avoid a hit on their credit that a foreclosure would create. Although the lender essentially loses money on a short sale, they often agree to this type of sale to stop foreclosure, which has a lengthy and costly process. And remember, is the lender who always have the last word witout their approval letter you can not sell a house in a short sale term. Length of Time to Move After a Short SaleThe wait for short sale approval can be from 2 to 3 months, or longer. Effects on Credit After a Short SaleIt should be noted that there are still negative ramifications for short sales, even if less damaging than those associated with foreclosures and/or bankruptcy. Some clients have reported negative FICO score drops from 50 points to 230 points. The point drop is typically due to being in default, that is behind on your payments;, however, short sales do carry less negative effects than foreclosures. Taxation After a Short SaleA personal residence is exempt from mortgage debt relief until the end of 2012 on a federal level. Some states will still tax you unless you qualify for an exemption. An investor is not exempt from mortgage debt relief, subject to certain conditions. For your protection, I suggest that all borrowers: |