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Financial Obligations and Liabilities of Short Sales


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The short sale process will take between 2 months and 1 year, depending on the lender and will take you more than 40 hours from start to finish. So shouldn't you be sure that this is the right decision?

Every lender is different and some have policies that require a promissory note which requires you to pay back a portion of the forgiven debt in monthly installments over several years. This is the first obligation to be on the look-out for.

In some cases you can negotiate with the lender to accept the short sale payoff as payment in full, which means they will not pursue a ‘deficiency judgment’. In other words, the debt is fully forgiven at the time of the sale so you don't have to worry about owing anyone after the short sale is completed; that is, until taxes are due.

Depending on the situation income tax may be owed on the forgiven debt. The difference between the debt and the sale amount is considered Cancellation of Debt when you sell. Taxes need to be paid on this as if it were income, unless the property was the principal residence two of the last five years, the mortgage was used to purchase or improve the property, and the debt is less than $2 million.

On the other hand, if the home is foreclosed upon, it will eventually be sold, but much farther in the future, which will increase the deficiency. Homes that sell as REOs (foreclosed homes owned by the bank) almost always sell for less than if they are sold prior to the foreclosure. ) The difference between the original debt (plus all the court, attorney and late fees) and what the bank actually gets is greater, and you are liable for that amount.

To find out more about selling your home quickly and to learn other ways to stop a foreclosure visit: For immediate relief of your problem ownership contact Shawn Hutchison directly @ We provide Real Answers to your real estate problems


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