What is the difference between a short sale and a foreclosure? A lot of people are still unfamiliar with how a short sale works. Some differences between a short sale and a foreclosure is you only lose about 100-150 points off your credit score with a short sale and about 250 points with a foreclosure. The other advantages of doing a short sale is the difference owed in the mortgage balance versuses what it sells for you only pay the tax on that amount.

For example if you owe $200,000 on your mortgage and it sells for $150,000, the bank will give a 1099 form from the IRS as income received and you pay the tax on the $50,000. With the new law that passed, if it is your primary residence you don't get taxed on the difference. This doesn't mean the bank will not ask for the seller to contribute something. I've seen some seller's pay nothing and some who had to contribute money.With a foreclosure you could get  a deficency judgment against you if you don't pay back the difference between what the mortgage is and what sells for.

The other advantage of a short sale versuses a foreclosure, is that within 18-24 months you have a better chance of getting a mortgage at a decent rate. The process usually takes about 30-90 days for the bank to approve the offer and then 30 days to close the property. There are items the bank is going to want from the seller usually, but not always every bank is different.

1. Hardship Letter
2. 2 years of tax returns
3. Last 2 months of pay check stubs
4. Last 2 months of bank statements
5. Monthly financial statement

Acceptable Hardships

 

• Unemployment
• Divorce
• Medical emergency / sudden illness
• Bankruptcy
• Death
• Lessened Income
• Excessive Obligations
• Employment Transfer Out of State
• Military Service
• Unable to Sell Home
• Unable to Rent the Home
• Incarceration
• Business Faliure
• Adjustable Rate Mortgage 

Most banks are willing to work with you if you want to stay in your home, but if you find yourself unable to make the mortgage payments after exhastuing all of your resources then a short sale is going to be the best solution. I also recommened seeking the advice of an accountant for tax purposes, especially if this is an investment property.

If you would like more information on how the process works or not sure if this would apply to you. I can set up an appointment with you to discuss it further. I can also be reached directly at  (941) 920-0669 anytime.