Here are 10 things everyone who is “under water” on their home should know:
1. If you owe more on your home than it’s worth, you can still sell in most cases, even if you do not have the money to pay the balance of the loan. This is called a short sale.
2. If you do a short sale, in most cases lenders are processing these fairly quickly – from listing to close can be as little as 60 days, 90-120 days is more common.
3. Most lenders will stop the foreclosure process if you are working on a short sale.
4. Most sellers can get full debt forgiveness from their lenders (meaning after the sale they no longer owe their lender).
5. If you get debt forgiveness THIS YEAR (this requires you close your sale by 12/31/2012), most people will not have to pay taxes on that forgiven debt. (See information on the Debt Forgiveness Act here.)
6. A seller’s credit WILL be damaged; but it is temporary. Before you do the short sale, consider your credit related needs, especially as it relates to finding your next place to live.
7. Although high security clearances often require credit reviews, I have never had a seller have trouble renewing their security clearances because of a short sale. Especially in these circumstances, short sales are preferred over foreclosures.
8. Some sellers are eligible for financial assistance when they file for a short sale… It’s mind blowing and I know it, so let me say that one again: YES, some sellers receive CASH from their lender for doing the short sale.
9. Short sale sellers without extenuating circumstances can restore their credit to above 700 – in most cases – within 2 years.
10. Most short sale sellers can be eligible for a home purchase loan in as little as 3 years (via an FHA loan which only requires 3.5% down). Some sellers can get loans sooner.
These 10 things reflect “typical” experiences with short sales…. it does not account for every “what if” which may apply to you. I am happy to talk with you more to learn about your circumstances and then I can provide you with information about what the most likely scenario is for you, should you need to do a short sale.
Vicky Chrisner, Fieldstone Real Estate