Short Sales

If you cannot make payments on your California home and you are looking for ways to avoid having a foreclosure listed on your credit report, a short sale is one option that may allow you to sell your home before the foreclosure can be finalized. While you will still have to move, it can reduce the damage done to your credit rating, and provide you with the ability to obtain housing elsewhere, once your financial obligation to your current property is settled.

A short sale arrangement is one in which the mortgage lender agrees to allow the homeowner to sell the home for less than the current balance of the mortgage. In this way, the homeowner is allowed to "come up short" on the selling price, but not held responsible for the balance left on the mortgage. This is generally an option when housing prices have fallen in your area and in those cases when you have some equity in the home as well.

For a short sale, you will be expected to find the buyer, and complete most, if not all of the necessary arrangements for the sale. Your mortgage lender has the final say as to whether or not the final selling price for the home is acceptable. Therefore, there can be a lot of uncertainty surrounding a short sale arrangement, especially for those who are new to real estate transactions.

In addition, you may also be financially responsible for taxes on the forgiven debt. This "forgiveness tax" can be particularly troublesome if the amount of forgiven debt is substantial. This is because the IRS usually treats forgiven debt in a short sale as income, meaning that it could push you into a higher tax bracket, and increase your overall tax obligations - not a good option when you are struggling financially.

Ultimately, the choice to pursue a short sale is one that is decided by the mortgage lender's willingness to accept the arrangement, so you cannot count on a short sale to eliminate your financial concerns. You may wish to consider filing for bankruptcy protection in conjunction with the short sale attempt, to ensure that your home is protected from foreclosure proceedings while you work out the details with your lender. Speak with one of our experienced Orange County Bankruptcy Attorney today about your case. Don't wait - the sooner you set up your free initial case evaluation, the sooner you will have a full understanding about what the short sale could mean to your financial future and whether or not it's the best option for you.