Mortgage Forgiveness Debt Relief Act

In 2007, a temporary measure was passed called the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act. Many Homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score far less than a Foreclosure or Bankruptcy, and usually does not have the same consequences when applying for credit in the future.

Short Sale vs Loan Modification…

Short Sale vs. Loan Modification ~ Many Borrowers are facing Financial Hardship due to their inability to keep up with their mortgage payments, and in turn are looking to Modify their Mortgage. Although this option may make sense for some borrowers, the reality of a Loan Modification is this: They generally DO NOT Reduce Your Principal Balance, only the rate or payment. They generally allow the Borrower ONLY enough room to Survive when they consider the Repayment Plan Payments and your Budget. If the Wrong Financial Information is sent into your Lender, you may end up accidentally eliminating the Short Sale as one of your options! Also, most Companies that offer Loan Modifications will usually charge anywhere from $1500 – $3000 to perform their services, and may not even succeed.

Short Sale vs Foreclosure…

Short Sale vs. Foreclosure ~ A Foreclosure is possibly the Most Damaging Credit Consequence of all the options when facing a hardship with your Mortgage. Not only do you lose your property, but you are generally responsible for the entire difference of what you owe vs the proceeds from the sale of the foreclosured home. In a Foreclosure, there are additional attorney and court fees that the homeowner will generally be responsible for. The Lender will generally file a Judgement for the amount owed, and you will usually be required to repay the Judgement before any other credit will be extended to you (i.e. – No More Cars, Credit Cards, Mortgages, Student Loans, etc). Also, even if you pay the judgement back to the Lender, most mortgage companies will not be able to lend you money for a mortgage for atleast 5-7 years.

The Importance of Hiring an Expert Team

We suggest that the first step to a Short Sale is to hire a Real Estate Team who’s Expertise and Specialty is closing Short Sales. Unfortunately, many Realtors today are learning how Short Sales work with their customer’s homes and financial lives on the line. Don’t just trust any Agent with your home, because your situation is no situation for On the Job Training. Give us the opportunity to show you how our Results and Process differs from other Agent Teams.

Our Consultation and Short Sale process is Free, and our Listing Fees will almost always be paid by your lender when the home is sold. We will be assisting with the entire process by:

Providing you with a Comparative Market Analysis (CMA) or Broker Price Opinion (BPO) so that your Home is Listed and Sold for a competitive, yet Lender Approvable Price.

Extensively Marketing your home with our proven Marketing Strategies, helping you quickly secure an acceptable contract.

Using the Correct Contracts and Contract Addendums so that your home is clearly indicated as a Short Sale and is treated as such.

Handling the processing of your Financials and the work with your Lender(s)

Gathering all the necessary Documentation upfront that the lender will require when proving your Financial Hardship.

Putting together the Short Sale Package correctly so that your lender will give you approval to sell your home through a Short Sale

What Happens After the Short Sale Process is Over?

Although a Short Sale is usually the Best Financial Choice, the reality of any of your options is that there may be financial consequences.

Even if your lender does approve the Short Sale, you may need to hire a Real Estate Attorney. Here are some topics that you need to keep in mind:

You may be asked by the lender to sign a promissory note agreeing to pay back a portion or full amount of your loan that is not paid off by the Short Sale

Any amount of your mortgage that is forgiven by your lender is typically offset by the Lender issuing what is called a 1099-C. A 1099-C may be required to be considered as income when you file your taxes, and you may have to pay taxes on that amount.

On a positive note, a temporary measure was passed in 2007 called the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act. Many Homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012.

Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score far less than a Foreclosure or Bankruptcy, and usually does not have the same consequences when applying for credit in the future.

What is a Short Sale?

A Short Sale is a transaction where the net proceeds from the sale won’t cover your Total Mortgage obligation and closing costs, and you don’t have any other sources of money to cover the deficiency.

When a Short Sale is executed correctly, it is a Win-Win-Win Solution for the Distressed Homeowner, their Lender, and the New Buyer. The Lender will receive the highest Marketable Price while avoiding the higher costs associated with a Foreclosure, the Borrowers Avoid a Foreclosure from being entered onto their credit, and the New Homeowner gets to Purchase a property at Today’s Most Competitive prices. Generally, the borrower also receives relief from possible future legal actions and deficiency judgements.

Short Sales occur when a borrower sells their property for a sales price that is less than the amount that they owe to their lender(s). In order for this to take place, the lender(s) must accept a discounted payoff. This means that the bank gets paid less than the full loan amount owed. In a Short Sale, the homeowner usually receives complete or partial relief from all of their mortgage debt after the sale is finalized and avoids an financially crippling Foreclosure or Bankruptcy on their credit report.

The end result is that you Sell Your Home, Satisfy or Settle Your Mortgage, and Avoid a Foreclosure or a Bankruptcy.

Why Consider a Short Sale vs. Other Available Options?

When facing a Financial Hardship with your Mortgage, there are always several choices to consider. The following sections explain why a Short Sale is often the Best Financial Choice when compared to other choices.