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If you are facing foreclosure, sometimes a short sale is the answer to end the foreclosure. How does a short sale work and what is it?
A short sale is when you sell the property for less than what you owe and the bank agrees.
For example, you owe $200,000 on your mortgage but the market value of the house is $150,000 and the offers being made are for $125,000.
If the mortgage company is in agreement, the house may be sold for less than the $200,000 and the bank will waive the balance of $50,000.
Short sale vs foreclosure
For both the seller with a mortgage that is “underwater” and the bank, foreclosure is a bad place to be. But, with a short sale, the consequences are better than a foreclosure.
With a foreclosure, the home owner will eventually have to file for bankruptcy. The bank will sell your property at auction and will receive considerably less.
In addition, the bank has to spend money to hire a lawyer to start the foreclosure process, remove contents from the home, even fix it up if the bank decides to take back the property to sell it themselves. Even then, there is no telling how long the property will be for sale.
For the seller of the property who is now avoiding bankruptcy, a short sale on their credit report is far better than a foreclosure. However, note that the difference the bank waived, it is likely that you will receive a 1099, but an experienced accountant or CPA should be able to resolve that issue for you.
In addition, sometimes the bank is even willing to help out with the attorney’s fees in your case.
Have questions about a short sale or are facing foreclosure? Contact attorney Alex Hernandez for your free consultation.
Representing clients in the areas of Chapter 7 Bankruptcy, Family Law/Divorce, and car and motorcycle accidents for 20 years.
(904) 712-5565 or (305)-688-LAWS (5297).
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