What Are the Advantages and Disadvantages of a Short Sale?

 Posted on April 29, 2020 in Foreclosure

If you are behind on your mortgage payments, you know just how stressful it can be. You may end up losing sleep because you are worried about what will happen to your home. If you owe more on the home than it is worth, you may be a risk of foreclosure. In situations like these, one option that many people find preferable to foreclosure is a short sale.

During a short sale, a home is sold for less than what the owner owns on the home. Additionally, the lender generally agrees to accept less than the amount owed by the borrower by means of a the short sale. This option comes with certain advantages, as well as some disadvantages. If you are concerned that your home may be foreclosed on, a qualified foreclosure lawyer can help you determine whether or not a short sale may be right for you.

Short Selling to Avoid Foreclosure

Research shows that approximately one in every 1,380 Illinois homes is foreclosed on. Foreclosure can be an extremely stressful and embarrassing process to endure. Although foreclosure can happen to anyone, many people feel a great deal of shame regarding foreclosure. The greatest benefit of a short sale is that it can allow you to avoid foreclosure. When a you have a foreclosure in his or her credit history, you will not be eligible for another mortgage for a minimum of seven years. However, this waiting period may be as short as two years if the home is sold through a short sale.

Deficiency Judgments and Taxes

One issue to consider when you are thinking about short selling your home is the risk of being subject to a deficiency judgment. A deficiency judgment is a court ruling against a borrower whose mortgage is in in default. In other words, it is a lien placed on the borrower for additional money. To avoid a deficiency judgment, a short sale agreement must specifically state that the lender waives its right to the deficiency. Another consideration is the tax implications of a short sale. If your lender cancels your debt through a short sale, the IRS may consider the excused debt as taxable income. However, you may be able to avoid this tax if the home was your primary residence.

Contact a Lake County Foreclosure Defense Lawyer

If you cannot afford to pay your mortgage, a short sale may be a valid option for you. For personalized guidance regarding foreclosure, short sales, and more, contact an experienced Libertyville real estate attorney from Newland & Newland, L.L.P. Call us today at 847-549-0000 and schedule a free consultation.

Sources:

https://www.realtor.com/advice/what-are-the-advantages-and-disadvantages-of-a-short-sale/

https://www.investopedia.com/terms/d/deficiency-judgment.asp

https://www.realtytrac.com/statsandtrends/foreclosuretrends/