Questions About Short Sales
Short sales are common, but they are not simple. Many of our clients who are unable to keep up with their mortgage payments come to us for information about short sales.
At Sobti Law Group, we help clients in Beaumont, Orange, San Bernardino, Corona and Palm Springs, California, find lasting debt-relief solutions that are tailored to their individual needs. Our attorneys are experienced and skilled with short sales. We can help you through the short sale process and give you the information you need to make intelligent decisions.
Answers
- What is a short sale?
A short sale is a process by which a homeowner sells the home for less than what is owed on the home. The seller accepts the lower purchase price as payment in full per a settlement.
- Why would a lender allow a short sale instead of foreclosure?
In a market with far more houses for sale than buyers, many lenders prefer a short sale because they don't have go through a foreclosure, and then an eviction, which could be expensive, or take title to a home that is unlikely to sell at a good price.
- Will a short sale have any tax implications?
Yes. One of the most important tax implications of a short sale is the form 1099 reporting of loan forgiveness. Because the lender takes a loss on a short sale, the amount that the lender loses is considered loan forgiveness, which is a taxable event that must be reported.
- What will a short sale do to my credit rating?
This depends in large part on what the lender reports. While a short sale will probably have some negative effects on your credit score, it is certainly less damaging when you compare a short sale versus a foreclosure.
- What affect will bankruptcy have on a short sale?
If you are in the middle of a bankruptcy proceeding, you will not be able to have a short sale. A short sale is a collections activity, which is prohibited during a bankruptcy proceeding, so a lender is not allowed to work out a short sale during that time. If you have just received discharge of your debts through a Chapter 7 bankruptcy or debt reorganization through Chapter 13 bankruptcy, there should be no need for a short sale provided the home was listed correctly in the bankruptcy as a surrendered asset.
- Will I be free and clear of the mortgage obligation after a short sale?
Generally, yes. But it is important to remember that some lenders do not consider this the end. Although they usually call the money they receive in a short sale "payment in full," we are seeing increased instances of lenders coming after the homeowners — sometimes years later — filing lawsuits to recover the amount they lost in the short sale, call the deficiency balance.
Contact Debt Relief Lawyers California ∙ Free Consultations
If you are considering a short sale, talk with one of our lawyers to get the initial information and understanding you need to make the right choice. Either call 888-627-8013 or contact us online to schedule your free initial consultation.
