Understanding Short Sale Implications
JK Short Sale empowers you to make the best of your current situation and put yourself in a position to pursue a brighter future. JK will work with you to identify possible negative consequences to your short sale transaction and help you avoid them, including referral to legal and tax advisors should you so choose. Possible negative implications of a short sale include mortgage deficiency, tax liability and credit.
A mortgage deficiency is the difference between the loan amount owed by the borrower and the purchase price of the short sale paid to the lender. In some states and in some instances, homeowners are protected from the deficiency. When this occurs, lenders can't pursue homeowners for the deficiency. However, in some cases, a short sale can leave you owing a substantial debt which the lender can collect by garnishing your wages or taking other aggressive collection actions.
Solution: JK will discuss your deficiency considerations before the short sale and refer you to legal advisors should you so choose.
When your loan obligation is waived, the amount of debt forgiven may be taxable. The Mortgage Debt Relief Act of 2007 allows several exclusions exempting this income from taxation through 2012. However, if the property is not your principal residence or if you have taken cash out at purchase or refinance, you should consider your situation carefully. Learn more about the specific exclusions in IRS Publication 4681. A properly structured short sale will help mitigate your tax obligation.
Solution: During the Free Consultation, JK will discuss short sale tax implications generally, as well as possible exclusions under the Mortgage Debt Relief Act. If you have questions about your tax liability, we can refer you to tax advisors.
A short sale will typically prevent you from buying a new home for two years under the new Fannie Mae guidelines. A bankruptcy, foreclosure, or deed in lieu is likely to prevent homeownership for much longer.
Solution: According to current Fannie Mae Guidelines, a short sale will impact your ability to qualify for a new home for only two years. If you have good credit and buying a house sooner is important to you, JK will refer you to legal counsel to determine if you have legal means available to protect your credit from any negative consequence.
