Are you confused about whether you should short sell your home or through foreclosure? You’re not alone. Every day millions of people in United States are dealing with the same problem and are asking the same question should they short sell their home or go through foreclosure?
What Exactly Is A Short Sale?
When a short sale goes through, the lender will receive payment for the property that’s less than the balance the homeowner owes on their mortgage debt. Banks typically approve short sales over foreclosures because, they can take possession of the property sooner, fix it up or perform any maintenance on the property and get it back on the market quickly plus a short sale also leaves less of an impact on the homeowner’s credit report and enables the borrower to purchase another home within two to four years. Homeowners who go for the short sale process may also qualify to get paid by their bank to short seller home up to $35,000 depending upon their lender. Even though the short sale option can be an asset to underwater homeowner’s, one consequence that’s not often talked about is that the balance that’s left on the homeowner’s mortgage is seen as income by the IRS and it’s taxable. The homeowner will be provided with a 1099 form after the short sale has completed so they can pay the tax on this income, come tax time.
How to Get a Short Sale Approved Faster
Homeowners can typically get their short sales approve faster if they hire a qualified short sale specialist like Fred Sed & Associates before starting the short process with their bank because, short sale specialists are experts at navigating the short sale process and helping homeowners with tasks like: writing a great hardship letter, organizing all of the necessary financial documents that will be requested from their lender and negotiating the best short sale price.
What Kills Short Sales?
Short Sales typically get killed by the lender due to the following reasons: • Poor financial management – If the homeowner racked up thousands of dollars of debt going on vacation, purchasing electronics for their home or new clothing for their family, these choices are often seen as lifestyle choices and are not seen as worthy enough reasons to grant the homeowners short sale. Divorce – Many times homeowners will try to short sell their home because, they’re going through divorce. If that homeowner is the primary income earner in the family, divorce will also be seen as a lifestyle decision and the short sale will not be grated. Bankruptcy – If the seller has filed for bankruptcy, because, any short sale negotiations • • are often seen as collection activities and these activities are often not approved in bankruptcies.
Should You Consider Foreclosure?
Foreclosure is typically the last option that a homeowner would choose when the mortgage is underwater. Foreclosure typically starts when the homeowner is behind on their mortgage for three months or 90 days. Once the mortgage is in default, the home owner will receive a Notice of Default (NOD) from the lender and this means that all of the homeowner’s rights to the property have been terminated. Any homeowner who is choosing the foreclosure option should also hire qualified real estate agent who has experience in dealing with foreclosures or an attorney to ensure that their best interests are represented and they are able to navigate the foreclosure process successfully. Any home owner who has gone through foreclosure can expect to wait for seven years or longer until they are able to buy another home again.