When you’re experiencing financial difficulty as a homeowner, it can feel like you have very few options available to you. Your worst fear is losing your home and when it feels like you’re on the brink of foreclosure, you’ll no doubt be feeling worried and sometimes even hopeless.
If you’re in a position where you’re struggling to keep up with your mortgage repayments and things are slipping behind, you may be thinking about what steps you should take next. If you’ve done a little research into short sales, you might be wondering if this is the answer for you.
A short sale is a complex real estate transaction
When you sell your property via a short sale, the person buying your property does so at a lower rate than what it’s worth. As the property is selling at an amount that’s less than the amount of the mortgage currently owed on it, the difference can be significant.
The lender will receive all of the purchase monies. It will then be for it to decide whether it pursues you for the remaining debt or chooses to forgive the outstanding amount.
You should know the details before deciding if it’s right for you
Sellers don’t turn to the option of a short sale on a whim as it’s a tough decision to make to sell your property for less than you know it’s worth. When considering the benefits, the main one is that it can help you to avoid going through foreclosure which means the impact on your credit score will be less. It also takes away some of the stress that comes with being saddled with mounting debt.
Having said that, the remaining debt left after the lender if paid might still be pursued by the lender. They have a right to apply for something called a deficiency judgment.
If your lender chooses to forgive the remaining debt you may need some assistance with understanding what tax implications this will have for you. The forgiven debt is considered to be an income on your tax return and you’ll need to take this into account at the end of the tax year.
If you’re considering a short sale, having some legal help with the process will be really important to making sure your legal rights are protected.