Making A Choice Between Foreclosure and Short Sale For Your Property

Posted by mlca ( on Jul 06, 2015 08:30 PM EDT
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When the time is running out and mortgage payments start piling up, homeowners opt to sell their house instead. However, if directly selling ones house does not materialize in a specified time frame, they are left with only two other choices which are short sale and foreclosure.

One must realize that there are setbacks that go along when choosing to foreclose your property. Being knowledgeable on how the process works is also essential as expounded by Marcel Ford. First, you will receive a Breach Letter that will lead you to a Foreclosure Workout between you and the lender. The objective is to come to solution for both parties in order to halt delinquent payments. This process will take 45 days, after which if nothing has come to a conclusion, a foreclosure action will commence.  It usually takes 90 to 120 days before you receive a Notice of Default or NOD. If involved in secondary loans, this is where the Junior Lien Holders come into play if they agree to take part for a solution.

Afterwards, a temporary indulgence is granted which usually takes 30 to 60 days where you're given a chance to bring the loan current. The borrower can also come up with special or long term forbearance. This involves payment suspension for 18 months (for special) and up to 24 months for long term. Other procedures may apply, like military indulgence, pre-foreclosure sale, deed-in-lieu of foreclosure, forbearance and modification.

A short sale may be a very enticing solution to your monetary problems. Short sale involves your granting of the lender to sell your home at a much lesser amount than you owe. So if you're required to pay $190,000 for your loan, the price of your home will be sold a "selling short" of $40,000 at an equivalent of $150,000 only. As posted by Donna S. Robinson, the lender may opt to let go of the deficient amount or "imputed income" by filling out a 1099-C form.

Take heed though, because the tax exemption which was granted in congress last 2007 has been officially expired. The exemption of taxes for "imputed income" due to short sale transactions ended at the last quarter of 2014. As a result, the "letting go" of the remaining balance of $40,000 by the lender can result to you being liable for a hefty tax problem the following year with the IRS.

You must ensure that you completely understand the pros and cons of having your property foreclosed or having it up for short sale. By discussing it with a professional may be helpful.

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