Foreclosure has become much too common recently. A sustained poor economy, reducing home values and job losses have made it difficult for many people to pay their mortgages. Sadly, there seems to be no end in sight.
Of course, some parts of the country have been harder hit than others, but no town, city or state has been spared the agony. People are losing their homes.
If you are finding it difficult to pay your mortgage and your equity has turned upside-down (your home is now worth less than your remaining mortgage balance), you may want to consider a “Short Sale” as a way to rid yourself of the property and avoid foreclosure.
A Short Sale occurs when you sell your home to a willing buyer for a mutually-agreed upon price that is lower than your mortgage payoff amount. The below-market-value price gives you a very good chance to find a potential buyer (perhaps several potential buyers) so that you may be able to sell your home quickly. Moreover, your mortgage lender may be receptive to a Short Sale because it eliminates the need for foreclosure and guarantees a much larger mortgage payoff than would be possible through foreclosure and a subsequent public sale.
It’s important to know that a Short Sale will affect your credit rating negatively, but it is still probably the best solution available to you. In fact, a foreclosure will impact your credit even more negatively than a Short Sale.
If you elect the Short Sale resolution to your problem, you will need the approval of your mortgage lender to this process. Once your lender agrees to let you do a Short Sale, it will report the difference between the purchase price you received and the mortgage payoff balance as income and send you and the IRS a Form 1099-C at year’s end.
Some people who use the Short Sale to divest themselves of a distressed property can legally exclude the income from taxation. Davidoff & Associates can help you realize this savings. Call us if you’re considering a Short Sale. We’ll assess your situation and let you know if you qualify for the exclusion. If you do qualify, we’ll help you prepare the paperwork that will lead to an end of your pressing financial problem.