The Irvine edition of the World Property Journal reported that distressed home sales in the U.S., which include REOs and short sales, accounted for 11.2 percent of total home sales nationally in January 2016, down 3.3 percentage points from January 2015 and up 0.6 percentage points from December 2015.
Within the distressed category, REO sales accounted for 7.8 percent and short sales accounted for 3.4 percent of total home sales in January 2016.
In the Omaha area, there are few homes in foreclosure, but with markets in turmoil, who knows the future. In the housing crisis of 2008, a short sale was a way to move on from a bad investment. So let’s take a look a short sales and see what you should know.
A Short Sale Won’t Save Your Credit Score
NOLO says saving your credit score may be the most touted reason for choosing to short sale your home rather than letting it be sold at a foreclosure sale, however according to myFICO, short sales, foreclosures, and deeds-in-lieu of foreclosure are all “not paid as agreed” accounts and are considered the same for purposes of your FICO score.
Short Sales Don’t Always Cancel the Remaining Debt on the Mortgage
When a lender approves a short sale, what is the lender agreeing to do? At the very least, the lender is agreeing to remove or release the lien on the property. A seller would have a near impossible task in selling a property without this lien release.
Is the lender also agreeing to cancel the seller’s obligation to repay the loan in full? Not necessarily. Some lenders ask sellers to sign new, unsecured promissory notes before approving the short sale. Other lenders, without asking for new promissory notes, reserve their right to collect the deficiency — the remaining balance of the debt.
You May Owe Taxes on the Deficiency
If your lender forgives you for a deficiency after a short sale, you may owe taxes on the forgiven amount. That’s because it’s considered income by the IRS, upon which you may owe federal and state income tax. Under the federal Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude from your income all or a portion of the amount of forgiven debt in a short sale.
Hire an Attorney to review all documents
Since short sales are complicated transactions it is recommended that you hire an attorney to review the documents. Release of lien and protection from tax deficiency are very important to your financial welfare.
We are Styl Properties, Inc. here to help homeowners out of any kind of distressed situation and potential homeowners find their dream home. As investors, flippers or rehabbers, whatever you choose to call us, we are in business to make a modest profit on any deal, however we can help homeowners out of just about any situation, no matter what! There are no fees, upfront costs, commissions, or anything else. Just the simple honest truth about your home and how we can help you sell it fast to resolve any situation.
Give us a call today at 402.909.0608 to let us know what YOU need help with!