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What Is a Short Sale |
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Hello Edith,
While talking to some friends recently about all the foreclosures in the news, one of them mentioned something about "short sales". What are they? Could you describe their benefits and drawbacks?
Thank you very much!
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For some homeowners who can't pay their mortgage bills, and can't sell the place for enough to pay off the debt, a short sale is a great way out of the problem.
With a short sale, the lender agrees to take whatever you can get for your place, and cancel the mortgage. It saves your credit from the disgrace of a foreclosure.
Until recently one drawback was that the IRS regarded "forgiven debt" as taxable income. The ex-homeowners might receive a tax bill for the part of their loan they never repaid, at a time when that's the last thing they needed. Recent legislation, though, has eliminated that problem for the next few years.
But it can be hard to persuade a lender to agree to a short sale, though, if the homeowners have other assets they could tap. You've had to be practically penniless before you'd be offered a short sale.
These days, with foreclosures costing lenders so much money, they're a bit more willing to consider that solution. It's always worth asking. |
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Edith
Originally published on December 28, 2007 |
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