If you're currently facing the unfortunate decision of needing to explore the idea of selling your home via Short Sale, there are a few things you want to ensure you know. As with most things, there are positives and negatives when choosing to sell your home via Short Sale. While there are many pros and cons, these three positives and negatives seem to attract the most attention and impact the seller the most.
#1. Faster Credit Repair
Short Sales will generally improve faster than Foreclosures in regard to your credit, instead of taking 7 years to improve, you can start to see credit improvement as early as 2 years down the line without ample effort.
Related: What is a Pocket Listing?
#2. Debt Forgiveness
When you get approval for a Short Sale, the homeowner is given a huge debt forgiveness. This means that even if you sell the property for $50,000 less than you owe, the lender has agreed to eat the difference, thus saving you thousands.
#3. New Home Purchases
Unlike Foreclosures, when choosing a Short Sale, you are able to purchase real estate as early as 2 years after the Sale closes. This is a huge bonus for those who need a little time to get back on their feet but hope to purchase a home in the near future.
#1. Decreased Credit Score
One of the biggest negatives when choosing to sell via Short Sale is the impact it will have on your credit. While you will indeed sell your home and the outstanding balance will be forgiven, you can lost between 100-150 points on your credit score.
Related: Why Single-Story Homes Sell Faster
#2. IRS Taxable Income
Even if your deficient amounts are forgive though a Short Sale, the IRS will count the forgiven debts and deficiencies as income which means that you will have to pay taxes on the forgiven amounts from the lender.
#3. Short Sales Aren't Guaranteed
Unfortunately, even if you get approval from your bank/lender, you aren't guaranteed to have a successful Short Sale. If you are not able to sell the property for an amount the lender accepts, you are forced into Foreclosure. Likewise, even if you petition for a Short Sale you are not guaranteed approval and thus could face Foreclosure as well.
As with all things, it is important to research all options available to you, weigh the pros and cons, and ultimately decide what option fits your needs the best. What works for one person may not work for another this rings true in regard to Short Sales.
If you're currently searching for a new home, whether it be a foreclosure, short sale or a traditional listing, are in need of a seller's agent to help list and market your property or have any general questions regarding Palm Desert Real Estate, feel free to contact our office at any time.