There are Disadvantages to a Short Sale, as follows:
- It will negatively impact your credit for at least 2 years (sometimes more)
- You may not be able to purchase a home for a number of years after a short sale has occurred.
- A promissory note from the lender for part of the loan amount not being forgiven may be asked of you. Or a
contribution of a cash amount at closing.
- If the lender forgives and cancels the outstanding loan amount, the IRS may decide that you need to treat that as income resulting in taxes to you. So meeting with your tax advisor is important. Mortgage Forgiveness Act is in effect through December 2012 that should help you here but please consult with your accountant.
However, understand that you do have some control of the short sale terms when North Kingstown short sale agents negotiate with the lenders on the short sale for your home. Use Rhode Island real estate short sale agents that understand the process and have a legal team and negotiator working with them- it is very important!
A foreclosure does not wipe your financial slate clean on the other hand especially if you had a higher credit score (720+) when you started the short sale process FICO says. In fact, the recovery time to establish a good credit score will be longer for you. So doing a foreclosure instead of a short sale is not one I have ever recommended to a homeowner. Your wages can be garnished going forward, liens placed on other properties you own and the emotional load on you personally is not resolved. However, the disadvantages of a short sale are not nearly as negative as a foreclosure.
I do believe the short sale is a better way for a seller to move on with their life both financially and personally then a foreclosure.
Ensure you have the representation you need and that the short sale is processed correctly so it does not lead to foreclosure or the bank coming back years hence looking for the shortfall money from you.
Ginny Lacey Gorman is a member of short sale superstars. We work hard for our clients in making the short sale happen successfully. Visit my RI Real Estate web site to read more about the short sale process. If you are under water on your mortgage, please call me to find out your options at 401-529-7849 and have a confidential discussion. Disadvantages to a Short Sale.
Ginny Lacey Gorman is your go to North Kingstown Realtor® for real estate in North Kingstown RI and beyond…knowing the geographic area, schools, happenings, important tidbits of information and businesses well. As a North Kingstown short sale agent, if you are having trouble paying your mortgage contact Ginny to help you through the short sale process successfully. Waterfront, oceanfront, luxury and coastal RI real estate are my specialty but all of RI is my backyard. So feel free to search for RI Homes for Sale. When you are in need of a good professional for your buying and selling needs and an internet savvy Realtor® who sells RI houses in this real estate market - call Ginny at 401.529.7849.