What happens if you short sale your house?

A short sale, also known as a pre-foreclosure sale, is when you sell your home for less than the balance remaining on your mortgage. If your mortgage servicer agrees to a short sale, you can sell your home and pay off a portion of your mortgage balance with the proceeds.

Do you have to pay taxes on short sale?

Gain on short sales Similar to a foreclosure, any debt that your mortgage lender cancels because of a short sale is taxable only if the terms of your mortgage hold you personally liable for the full amount of the loan. Regardless of the tax consequences, your lender will report the debt cancellation on a 1099-C form.

How does a short sale work in real estate?

What is a short sale? A short sale happens when a homeowner owes more on the mortgage balance than the market value or sale price of the property at the point the owner wants to sell. For a short sale, the homeowner is essentially asking the mortgage lender (typically a bank) to accept a lesser amount than the total mortgage owed.

Which is better short sale or bank owned home?

For those who wish to purchase a home where the current homeowner is still involved and able to relay any information on the home, than purchasing a short sale is the better option, although a longer one.

Do you still owe money on a short sale?

If the amount the mortgage company receives from the sale is less than the mortgage debt owed, depending on state laws, the homeowner may have a deficiency judgment. In other words, the now-former homeowner may still owe money on the home loan. Foreclosures are less common than short sales.

Which is worse foreclosure or a short sale?

Furthermore, a short sale is far less damaging to your credit score than foreclosure. In fact, people who go through the short sale process can usually buy another house without having to wait, although securing a second mortgage might be more challenging.

What’s the difference between a short sale and a short purchase?

When a home sale results in less than the total debt balance remaining on the mortgage, and the lender agrees to accept the sale proceeds to release the lien on the property, the transaction is called a “short sale.” Short sales are one way that homeowners can avoid foreclosure.

Can a short sale be used as a foreclosure?

Short sales and foreclosures are two financial options available to homeowners who are behind on their mortgage payments, who have a home that is underwater, or both. In both cases, the owner is forced to part with the home, but the timeline and consequences are different.

Why are there so many short sales in real estate?

According to recent data from real estate information company RealtyTrac, about 5% of all single-family home and condo sales are short sales. Often homeowners are pushed into a short sale by personal financial troubles that make it impossible to pay their monthly mortgage to their lender.

Can a person buy another house after a short sale?

A homeowner who has gone through a short sale may, with certain restrictions, be eligible to purchase another home immediately. Depending on the circumstances, homeowners who experience foreclosure can expect to wait two to seven years to purchase another home. A foreclosure is kept on a person’s credit report for seven years.