Is short sell better than forclosure?
An Anonymous User asked:
6 months ago, my brother was strongly encouraged by my brother in law who is a realtor to purchase a house knowingly that my brother cannot afford it. My brother is now two months behind with his mortgage and wants to give up the house. He wants to know which one is better short sells or foreclosure? He is also worried about tax implications? Help.
wow thats hard. sorry to hear that. where is the home? i want to buy one
It’s better for you, in terms of money, but for future loans, it is treated the same as a foreclosure for underwriting purposes.
If he walks away from the loan, he most likely will get a 1099 showing it as income to him.
Short sale is better on a credit report; and has less actual consequences for deficency balance. Have to ask his accountant about the ttax end; depends on a lot of factors
Mary B is right, but let me add…The difference in mortgage due and the amount the bank accepts as payment is considered income. The bank is basically writing off the amount and are required to report.
It’s probably better for your credit, but a short sale is not a free ride. Most likely the creditor will report the deficiency as income to you. That will mean tax liability for you down the line. These situations vary as to how they show up on your credit report. The best reason to try for a short sale is to get it over with.
Do the short sale if possible. AVOID FORECLOSURE AT ALL COSTS. With a short sale you are released from further obligation; if the house is sold at foreclosure auction he can be sued for the balance (between the amount of the mortgage and what the house brought at auction).
I am not familiar with real estate law, so I think he should consult an attorney. I do know that foreclosure will not look good on his record if he ever intends to purchase other property. In either event, whether he sells or forecloses, I believe he will still be liable for real estate taxes on the house, for the period of ownership, but again, he should consult with an expert in the real estate field.
Yeah definitely short sale…because the short sale can bring equity to your home.