I found some great information about Short Sales. Many people aren't sure what they are or even why they are necessary at times. On top of being a Fine Home Specialist, I am also a certified Short Sale Specialist and am here to help you with all of your homebuying and selling needs.

What is a Short Sale?

A short sale is necessary when the proceeds from the sale of your home are not enough to pay off the loan balance against the home, thus prohibiting the sale. A short sale will allow a homeowner to sell their home for less than the amount owed on the mortgage, and in most cases, the difference does not have to be paid back to the lender.

4 Myths About Short Sales

I don't have a serious enough hardship to qualify for a short sale.

Today, it's harder to Not qualify, than it is to Qualify. There are numerous ways to qualify for a short sale and a borrower does not have to be behind on payments. If a borrower can show that they are struggling to make payments or are facing some other type of hardship such as a divorce, tenant moving, job transfer, medical emergency, decrease in pay, etc., then a bank will seriously consider approving a short sale.

I'll be responsible for the difference between what I owe and what my home sells for.

Most lenders will put the following verbiage on the short sale approval letter you receive in writing: "Lender will not seek a deficiency judgment against borrower". In most cases if a lender accepts a short sale they are going to write off the loss, show the debt as settled, and you are able to walk away from the debt without having to worry about your lender coming after you. There are a few lenders who are pursuing borrowers after a short sale.

My credit will be ruined if I do a short sale.

A short sale can actually save your credit. It is treated by your lender as a "settlement of debt", and as opposed to a foreclosure, it is infinitely easier on credit and for a much shorter period of time.

I will owe taxes on the amount of loss that the bank takes on my short sale.

This can be avoided most of the time. As an example, if your lender accepts $100,000 less than what you owe them they may report this amount to the IRS, and you will be taxed on that $100,000 as 'ordinary income' at the end of the year. Good news is there are many ways to avoid this tax, including recent legislation. You can research the Mortgage Forgiveness Debt Relief Act of 2007 or see if you qualify for "Insolvency". Contact your tax advisor.

Short Sales - Pros

1. Depending on the lender, you may be able to get a release from the deficiency in writing.

2. If your property is 100,000 dollars upside down, you get rid of the liability now. If you do a loan mod and then have to sell your house in two years, you may still be 100,000 dollars upside down or worse.

3. Within a few years your credit rating may recover and you may be in a position to purchase property in a down market.

4. You may get to live rent free for a while.

Short Sales - Cons

1. You may not be able to buy a house for a little while. (Average 1 to 2 years)

2. You will have to move eventually.

3. You may damage your credit (Though much less than a foreclosure)

4. You have to deal with the the selling process.