If faced with the choice to sell your home or face foreclosure, most consumers would choose to sell. Sadly this is a fact many Americans are having to face daily. The housing market is in a huge slump, and a full blown recession seems more possible every day. Many consumers are having to face these foreclosures despairingly, thinking that they have no choice because they can not get enough out of their home to do anything but. For many there is another choice. Short Sell.
Short selling your home simply means that the home is sold for less than what is left on the principal of the loan. Many Lenders would rather have a home short sold, than foreclosed on. Foreclosing costs the Lenders a great deal more than they are usually worth. But with a short sale the Lender is still able to retrieve at least most of the monies still outstanding.
There are many things to consider before short selling your home. There are some Lenders who refuse to allow a short sell. You must contact your Lender to see if there is the possibility that they will allow this. This is many times much easier said than done. A person often needs to go up the ranks of management at their Lending Company before they talk to someone with the authority to okay a short sell. Multiple calls will have to be made, and the process can sometimes be long and tedious.
Another important fact to remember when considering a short sell is that the Internal Revenue Service considers short sales to be a relief of debt, meaning income. Income is taxable. Therefore many times the IRS will force you to pay tax on the difference between what was left on your loan and the amount you actually sold your home for.
You will have to prove to your lender that you can no longer make the payments required to keep your home. Some sort of change is status will be necessary. If you ask for a short sell and can not prove that your situation has changed in any way since applying for your loan, your Lender could legally file charges against you for fraud. If you are unable to pinpoint why you can no longer make the payment you were approved for, the lender is forced to believe that your current situation stems from a problem before the home was bought.
The decision to short sell your home should never be taken lightly. It is best to speak with an attorney in the early stages of short selling so that none of the above will take you by surprise. The process can be long, but when faced with the option of foreclosure, it is well worth the trouble.
Look for tips on how to complete a short sell also written by this author.