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Short Sale in Real Estate may save you from Foreclosure.

A short sale provides homeowners the opportunity to sell their home for a lesser amount than is owed on the mortgage note. Engaging in a short sale can help the homeowner avoid foreclosure and reduce negative impact to their credit. In essence, a short sale allows the homeowner to give their home back to the lender and walk away from the property.

While a short sale may sound appealing, it's important to understand what a short sale is, how it works and how it can affect your income and tax liability. If you do not understand the process, it could end up costing you a considerable amount of money.

A short sale is a complex process, so it's best to work with a professional such as Simon Volkov. However, you'll first need to contact your lender's Loss Mitigation Department and inquire about their short sale process. Each lender has their own set of guidelines and not all lenders will enter into a short sale agreement.

If your lender agrees to a short sale, you will be put through a screening process to determine if you meet certain qualifications. Two short sale criteria include not having any equity in your home and owing more than the home is worth. Additionally, you will be required to show just cause for your financial hardship.

It's important to note there are two types of short sale: Deficiency Judgment or Payment in Full without Pursuit of Deficiency Judgment. If at all possible, you want to avoid Deficiency Judgment. This type of short sale requires the borrower to repay the difference between the short sale and actual loan. For instance, if the balance of your mortgage note is $200,000 and the bank accepts a short sale of $150,000, you will be responsible for the $50,000 difference.

The majority of people who qualify for a short sale don't have $50,000 lying around. What happens is a deficiency judgment in the amount owed is ordered and reported to credit agencies. The judgment stays on your credit report for 7 to 10 years, even if you pay it in full.

The second type of short sale, payment in full without pursuit of deficiency judgment, is the best option. With this type of arrangement, the lender accepts whatever amount the house sells for and will not pursue you for the difference.

When it comes time to pay taxes, you may or may not be responsible for taxes on the sale of the home. The IRS may consider the difference between the amount due on the loan and the short sale amount as taxable income. However, if you have negative assets both before and after the sale, chances are you will be exempt from paying taxes. It's best to seek the advice of a tax accountant or refer to the IRS rules regarding selling your home.

Short sales offer struggling homeowners an opportunity to wipe the slate clean and get a fresh start. However, you should take time to determine what caused you to get into this mess in the first place and what steps you can take in the future to avoid facing it again. Take this opportunity to review your finances and make a plan for improving them.

If you are facing foreclosure, talk to us about a short sale option. To obtain additional information, visit our Forms page and click on the link which best suits your needs. Upon receipt of your information, Simon Volkov will contact you to further discuss your needs. Please include your correct contact information and have your information ready and available. Doing so will help expedite the process to your financial freedom.