Any information on short sales?

[leo_075]

Hello,

I am wondering if anyone has any information on short sales? I have been reading online about them, but haven't been able to get very clear information.

Some people say that the lenders settle for less so that they don't have to go through a foreclosure, but what they settle for is less than what the seller owes so months later they come after you for the difference. Then there's other stories I have read online where they settle for less and that's that, but IRS comes after you for taxes on the difference.

I know that your credit takes a hit, but I'm sure it's better than a foreclosure being on your credit for 10 years. I found an agent that will do it, but she's only done one other and won't give me much information on it. If anyone knows anything about them that would be great.

Thank you!
L

[FortHoodRealEstate]

I think your forum moderator may have some good insight into this issue. The best place for you to start is with your lender. Try to contact their loss mitigation department. They should be able to answer your questions. Try to do it without identifying yourself. No reason to alarm them and have their notes reflect that you may be in distress. I do have to warn you, though, that loss mitigation departments can be hard to deal with. A good agent who has been around in your market for 8-10 years should have the experience necessary to answer many of your questions. In regard to the IRS issue, that should be left to a tax specialist. Contact a CPA for a consultation if you end up going with a short sale. You are doing the right thing to be asking these questions before you get into a short sale. Good luck to you!

[leo_075]

Thank you for your reply! I will do that first.

[gcalcines]

Hello,

I am wondering if anyone has any information on short sales? I have been reading online about them, but haven't been able to get very clear information.

Some people say that the lenders settle for less so that they don't have to go through a foreclosure, but what they settle for is less than what the seller owes so months later they come after you for the difference. Then there's other stories I have read online where they settle for less and that's that, but IRS comes after you for taxes on the difference.

I know that your credit takes a hit, but I'm sure it's better than a foreclosure being on your credit for 10 years. I found an agent that will do it, but she's only done one other and won't give me much information on it. If anyone knows anything about them that would be great.

Thank you!
L
Your credit will take a very big hit and it will stay in your record for 7 years. With short sale your record will show you sold the house before the repo and will only have the late payments you default during the foreclosure. One of the things you have to make sure when trying to sell your home in short sale is to send a letter to the bank forgiving the difference between what you owe and the sale price and have it sign by them so they don't come after you latter. they will ask you bank statements and other things to prove that you couldn't pay the mortgage, but that is something the Realtor will help you with. It is not an easy process so I suggest you find a good Realtor that knows what he or she is doing and explain the whole process to you. After two to three years you will be consider by lenders as a first time home buyer again and they will lend you money without any problem, but of course you have to work your credit record up again in order to have a good rate. It will still be in your record for those 7 years, but won't affect you to buy a home after that period. About the taxes I haven't heard anything about that so I don't think is true.

[leo_075]

Thanks for your reply. I have been hearing 3 years, but 7 years is a really long time! Just to clarify what you said: [It will still be in your record for those 7 years, but won't affect you to buy a home after that period.] It won't affect us to buy a home after 7 years or after the 3 years? Thanks again for your help. There's a lot of contradicting information on the internet.

[PaulChapman]

It will report and affect your credit history for 7 years.

Most lenders want to see atleast 24 months clean history. So to answer your question, you will be able to purchase another property within that 7 year period, you just won't get great financing. Your best bet, if you're that motivated to buy another property, would be to bite the bullet on the new mortgage for atleast 24 months, and then refinance.

[aprazma]

About the taxes I haven't heard anything about that so I don't think is true.

The amount of a lender's debt forgiveness is taxable income.

[leo_075]

There are ways to prove that you didn't actually make the money off the house though. Proving that it was a short sale to the IRS. I have looked into that much of it and that is the information that I have found. Basically, if you can prove that you didn't make the money off the house, you don't have to pay those taxes.