Avoid foreclosure, do a short sale!
Do you or know someone who owes more than what their home is worth and struggling to keep up with payments? Did you know that most mortgage lenders have an entire department dedicated to helping you avoid foreclosure? If you owe more than what your house is worth and want to get out from the payments, you can sell your home through what's called a short sale.
Despite what the name sounds like, it's not necessarily a short process, but it can be. The term refers to a lender accepting a payoff amount that's less than the principal owed. So let's say you owe $200,000 on your house, but it's really only worth about $175,000. And after real estate commissions, closing costs and other fees, you might only end up with $160,000. In a short sale, your real estate agent would negotiate with your lender to agree to accept $160,000 payoff on your $200,000 balance. The lender is "shorted" about $40,000 in this case and you walk away with a zero balance on your loan.
So what happens to the $40,000 difference? In the following year's tax season, the seller may receive a 1099C, which is a cancellation of debt and that $40,000 would be considered taxable income. However, in 2007, Congress enacted the Mortgage Forgiveness Debt Relief Act which cancelled that type of debt completely. The act initially covered a 3 year period until 2010. But congress has extended each year since then.
I've helped many clients walk through this process and sell their home, avoiding foreclosure. Feel free to call email or text me to set up a free consultation on the short sale process.
View post on imgur.com