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The big question we are facing is, "WILL a short sale affect me?" The answer is yes, however the ramifications are minor in comparison to foreclosing on your home. The next question is, "HOW will a short sale affect me?" In performing a short sale on your principal residence, one of the major things that would be affected is your credit. The great thing about this is, your credit can always be repaired, in as little as 2-3 years in most cases.
On the other hand, what most people fear is the tax consequences that would follow them even after they perform the short sale. FEAR NO LONGER! The government has enacted, The Mortgage Forgiveness Debt Relief Act and Debt Cancellation, which forgives the difference of the loan to current market value with proof of sufficient hardship. For example, if you purchased your home for $500,000 and the current market value of your home is worth $300,000, the $200,000 difference is forgiven with no tax consequences (as long as it's your principal residence). This provision applies to debt forgiven in calendar years 2007-2012. Up to $2,000,000 of forgiven debt is eligible. For more information in regards to this act, please visit irs.gov.
Like so many San Diegans, many home owners bought when the market was HOT! They thought that if they didn't buy at the time, they would miss out! Unfortunately the market took a turn for the worse! The only thing we can do is look forward in a positive direction and fix what has happened. |
Another question we are faced with is "Should I perform a loan modification and try to keep my home versus short selling?" That is a great question. If you were to look at the numbers, 99% of Loan modifications have not gone through year to date, and on top of that you have to come out of pocket with money in order to hire an attorney to get it done. A short sale is just the opposite. We ask the bank to pay all costs involved of the short sale process as well as the debt you are short on your home. This debt is forgiven and you will not be taxed on any of the monies owed. (remember, this is for your principal residence)
Every day we are helping homeowners like you to explore their options while getting you to where you need. If you have any additional questions in regards to the Short Sale process please feel free to call our office for more information. We would be more than happy to set an appointment with you to discuss your options.
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