Thursday, August 11, 2016
Will A Short Sale Save My House?
Homeowners who are underwater on their mortgage often try every possibility to save their home from foreclosure. This could include trying to get the lender to rewrite the mortgage so the payments are lower or finding a new lender to do a refinance. One option out there that gets a lot of press is the option of doing a short sale. This process is confusing and will not allow a borrower to stay in their home, but can offer some relief as far as an impending foreclosure case is concerned.
A short sale is a transaction where the lender agrees to take a lesser amount than what is due on the loan instead of foreclosing on the house. Some of the most common concerns with short sales are:
• What happens to the balance of the loan amount due? Most borrowers will not want to go through with a short sale only to find out their bank is still planning on coming after them for the deficiency. If you are considering a short sale it is critical to get the terms in writing so you are aware of your responsibilities after the transaction is finished.
• If the deficiency is waived are there tax consequences? This is tricky and is a question best left to a CPA, but the general rule is that if the lender accepts a short sale they can still send a 1099 to the homeowner for the deficient amount that has been waived, because the lender can consider this amount as “income” to the borrower. This makes a huge difference when you file taxes and before agreeing to a short sale you should learn all you can about the tax consequences from a knowledgeable tax professional.
• How long will a short sale take? Short sales are a notoriously lengthy process. If you are considering offering your lender a short sale it is best to buckle down and be prepared to wait a while before the deal is complete.
If your goal is to save your house from foreclosure a short sale can work for you, but if you want to remain living in the home a short sale will not work. A better answer is to file bankruptcy if you want to keep living in your house. Bankruptcy will let you eliminate some of your debt so you can pay the rest and this would include being able to make your house payment so you don’t get foreclosed out of your home. Call us today to find out how we can help you save your home.
If you have more questions about bankruptcy and how to save your house from foreclosure, contact us at www.law-ri.com. We will help by coming up with solutions that work for you and have multiple locations to meet your needs for office visits.