Many lenders will offer borrowers short sale options. Short sales could be beneficial to you because it may not affect your credit as much as a bankruptcy or a foreclosure. Furthermore, short sales offer some closure to borrowers so they can move forward with their lives as opposed to a long foreclosure process.
A short sale is selling your home before it is foreclosed on by the Bank, for a less amount than is owed to the Bank. However, there are many issues that need to be addressed by an attorney in a short sale. If the Bank accepts a lesser amount than is owed on your residence, the Bank has the option of pursuing a judgment against you for this deficiency. For example, if you owe $300,000 on your residence and the property is sold for $200,000, the deficiency would be $100,000. If the Bank chooses to go after you for the deficiency, you may actually be in a worse condition than if you had fought the foreclosure.
Moreover, if the Bank decides to waive the deficiency, there may be tax consequences if the house was not your primary residence. If the house was your primary residence, a Bank may not be required to issue you a form 1099 based on new federal laws. However, if the property was not your primary residence, a Bank may be required to issue you a form 1099 at the end of the year based on the amount that the Bank did not collect from you. However, having an experienced attorney may help you out in negotiating and settling with the Bank on more favorable terms.
Banks often times require the borrower to sign a promissory note for a portion of the deficiency. Many times these notes can be negotiated to a zero percent interest rate and payment over a period of ten years or more.
Banks have 5 years to pursue a deficiency judgment against you and in Florida judgments last 20 years. It is important that you have an experienced attorney help you in the short sale process. Call the Noble Law Firm for a free consultation.
Deed in lieu of foreclosure
In some cases, the Bank may allow a borrower to give the property back to the Bank in lieu of a costly foreclosure process. In this scenario, the Bank becomes the new owner of the property instead of a third party. In this case, the Bank will waive any possible deficiency judgment against you. However, there may still be negative tax implications. Contact the Noble Law Firm for a free consultation concerning the costs and benefits of a deed in lieu of foreclosure.