Common Short Sale Issues

What is a short sale in Palm Harbor or Dunedin and what are some common issues you might face.

Let’s start with what a short sales is. A short sale, according to the CDPE website, is “when a negotiation is entered into with the homeowner’s mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then ‘sold short’ of the total value of the mortgage.” In layman’s terms, this means that the bank agrees to accept less than is owed in order to sell the house to disinterested third party (this is a biggie).

Some common short sale issues and tips that you will hear which are just not true!

You can just have your son, niece, boyfriend, or Uncle Bob buy your house and no one will notice, with the added bonus that you will get out from under that huge mortgage and you can keep living there! Well, that is not only unethical, but is in a word, FRAUD. There are many parts of the short sale process that are vetted and which will trip you up legally should you try these shenanigans. Short sales are for people experiencing true hardship and are not a way to “game the system”.

You will owe gagillions in taxes on your short sale. This one is trickier! During the short sale process we can request that the bank consider the amount collected from the buyer to finalize the process and consider your obligations “paid in full”. That leaves a balance between what is owed and what is accepted. This difference CAN be taxed but is not ALWAYS taxed. The actual verbiage is:

The difference between the remaining amount of principal owed and the amount that the servicer receives from the sale must be reported to the Internal Revenue Service (IRS) on Form 1099C, as debt forgiveness. In some cases, debt forgiveness could be taxed as income. A short sale may have income tax consequences and/or may have a derogatory impact on your credit score. Homeowners should contact the IRS or their tax preparer to determine if they may have any tax liability.

Please give us a call to talk about your particular situation on this one, understanding that we are not attorneys and cannot give legal advice!

There is a magic “plan” out there that will save your home from short sale or foreclosure. We are HORRIFIED that so many people are preying on people in need (Mortgage modification scams made the list of the Better Business Bureau’s Top Scams of 2011, with more than 20,000 complaints, according to the CDPE website). While there are many things you can do in a situation where you cannot afford your home, hiring someone who has a “plan” to save your home without following the proper channels is a sure recipe for disaster.

If you are looking for a great CDPE Certified Real Estate Agent in the Palm Harbor or Dunedin areas of FL, (zip codes 34683, 34697, 34698) give us a call today! 727.366.0325

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