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Does a seller have the option not to present an offer to the bank in a short sale situation? If a house sells via short sale, the seller is taxed on the difference next year, yes? Is it somehow easier financially to foreclose? Is the ding to your credit worse with one than the other?
I have a client that turned down an offer cause they would need to bring money to the table at closing which they don't have. They don't have the 3-6 months to jack with their lender for a short sale since they will be filing bankruptcy in about 2-3 months.
Letting the bank foreclose and filing bankruptcy they thought was a better option then throwing $10k after a house they were about to lose.
Does a seller have the option not to present an offer to the bank in a short sale situation? If a house sells via short sale, the seller is taxed on the difference next year, yes? Is it somehow easier financially to foreclose? Is the ding to your credit worse with one than the other?
Yes the seller has the option to not present an offer to the bank in a short sale situation. They are the legal owners and can accept or reject whatever offer they chose.
If the house is a primary residence then the tax debt relief act kicks in and they don't have to pay tax.
Sometimes foreclosure makes more sense.
Yes, foreclosure is a worse ding than a short sale.
I was always under the impression that short sale is "better" than a foreclosure on the credit report but several recent articles on the topic indicate it's kinda of like 6 of 1, 1/2 dozen of the other as far as impact on your credit score.
If the house is a primary residence then the tax debt relief act kicks in and they don't have to pay tax.
IF....and I stress this as it is a big if...
The money that is being written off is either original debt used to purchase the home (1st and 2nd are ok)
OR
A second or HELOC taken out after the fact that is used entirely for home improvements.
IF you take out a second to pay down debt, or buy a boat, or go on vacation, that money is taxable even on your primary residence in the case of a short sale.
I was always under the impression that short sale is "better" than a foreclosure on the credit report but several recent articles on the topic indicate it's kinda of like 6 of 1, 1/2 dozen of the other as far as impact on your credit score.
I would think that for 95% of the people in this position their credit will be shot either way due to additional unpaid debts. Probably unpaid credit cards, repo cars ect.
When your credit score is 300 raising it to 350 probably is not much of a factor.
The money that is being written off is either original debt used to purchase the home (1st and 2nd are ok)
OR
A second or HELOC taken out after the fact that is used entirely for home improvements.
IF you take out a second to pay down debt, or buy a boat, or go on vacation, that money is taxable even on your primary residence in the case of a short sale.
Yes. This is good to clarify that. You don't get to go on a buying spree and not have tax consequences.
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