There are three main issues that every person who completes a short sale needs to know about life after short sale.
DEFICIENCY JUDGEMENT – Did you get in writing in the approval letter assurance that the lender or lenders will not pursue you for the unpaid balance of what was owed after the proceeds of the sale? We call this waiver of deficiency judgement.
TAX LIABILITY – What is your tax liability after the short sale. In almost all cases the lender is required to report the amount of debt forgiven to the IRS as a “gift” and will send a 1099 to you at the end of the year. Do you have to pay taxes on the balance you were forgiven? With the help of your CPA (you will need a CPA to prepare your taxes in the year you do a short sale) we can help you attempt to mitigate or eliminate the tax liability.
CREDIT SCORE – Fair Issacs, the people behind your FICO Credit Score have recently lessened the effect of a successful short sale on a person’s credit. If you were 60 or more days behind on your mortgage the fact is a short sale may actually help your credit score as soon as it is posted. A short sale is generally reported as “Account settled for less than what was owed” and that is in many cases preferable to “Account 60/90/120+ days past due”.
Every short sale is like a snowflake, unique and intricate. Come in for an initial consultation and we will put your situation under the microscope.