Friday, March 23, 2012 - Article by: Bert Carpenter - Certified Mortgage Consultant, NAMB Nova Home Loans -
lthough I am a mortgage Lender, and hate to see anyone lose their home, there are times when it becomes clear that the homeowner must choose between a foreclosure and a short sale. Here are 10 advantages of doing a short sale, rather than a foreclosure:
Reason # 1. ~ Its easier than ever. Banks are beginning to embrace short sales. Why? Because they now realize that the short sale saves them much more money when compared to the expenses incurred in a foreclosure. Fortunately, the process is now more streamlined and less stressful than ever.
Reason # 2. ~ There is no cost to your. Your lender almost always pays all closing costs and commissions. In some cases you can even receive a check at the closing to help you pay for your move out.
Reason # 3. ~ You can stay in the home until the sale is complete and usually not have to make any more payments to the bank. Homeowners that choose to do this should continue to make payments to their Homeowners Association to avoid being sued. The foreclosure does not wipe out this obligation.
Reason # 4. ~ Arizona is an Anti-Deficiency state. This means that in most cases in Arizona, your lender cannot come after you for a deficiency if you used the borrowed money to purchase the home or make improvements to the home.
Reason # 5. ~ Your debt forgiveness is NOT taxable. Prior to 2008, any mortgage debt that was forgiven by a bank was taxed as though it was normal income. Meaning if your bank lost $100,000 on the short sale of your home, that was reported to the IRS and you had to include it in your income and pay taxes on it. Taxed at 28%, this would result in a homeowner paying $28,000 in additional taxes...Ouch!. The Mortgage Forgiveness Debt Relief Act essentially eliminates this problem.
Reason #6. ~ Mortgage Forgiveness Debt Relief Act is expiring soon. The benefits of this act have allowed countless individuals to move forward in their life without being burdened by a potentially huge tax debt. The problem is that unless extended, the act expires December 31, 2012.
Reason # 7. ~ A short sale almost always hurts your credit LESS than a foreclosure. Granted, you will still have to wait a penalty period before you are eligible for another mortgage, but you will do less damage to your credit.
Reason # 8. ~ Avoid the embarrassment. No one wants to admit that they can't afford their mortgage payment. A foreclosure usually implies that you couldn't whereas a short sale simply means you had to sell the property for less than you owed. A foreclosure almost always will drop the value of other homes in the neighborhood much more than a short sale. This will make your former neighbors much happier, or less unhappy.
Reason # 9. ~ Get Rid of Stress. Being upside-down on your mortgage can be very stressful. A short sale will usually take less time to conclusion than a foreclosure, meaning you can rid yourself of the stress sooner.
Reason # 10. ~ Probably the best reason of all. Today is the first day of the rest of your life. Once your short sale closes escrow, you are on your way to a better future.
Please make sure that before you make any decisions, it is best to consult with your attorney and accountant to make sure the choice you make is the best one for your situation.
~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com
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