There’s a lot to love about distressed mortgages. Believe it or not, being “upside down” on it gives you an opportunity to pull of a short sale. A short sale is where you sell your property for less than what you owe on it. Why would you do this? For the money, of course. Here’s how you benefit.
You May Get A Cash Incentive
One of the lesser-known aspects of a short sale is that, if the bank approves it, is that you may get a cash incentive to stay in the house and take care of it until it can be sold. Most bankers don’t want to pay a property manager – especially when you’re already there. They will pay you between $1,000 and $10,000 or more – sometimes up to $30,000.
In exchange, you promise to take care of the home and do any regular maintenance. You also agree to help sell the home by hiring a real estate agent and completing the short sale. You’re bound by the bank’s terms and conditions surrounding the offer and sale price for the house. In other words, the bank basically sets the selling price of the home by dictating what it will and will not accept from the buyer.
Your Debt Is Forgiven, But Not Forgotten
Any shortfall on the loan is “forgiven” by the bank, but it’s not forgotten by the IRS. You’re issued a 1099 and the debt is reported as income. You pay income tax on this amount. Ouch. Some homeowners use the cash incentive to pay the tax. Others simply pay back the remainder of the loan, if possible.
Short Sales Can Help You Get On With Your Life
A short sale doesn’t necessarily mean the end of your financial life. If you use a Bloomfield Short Sales Specialist, the process may only take a few months. You get to move on with your life, with cash-in-hand.
You may not be able to buy a new home right away, but you can always find an apartment and, with the money from the bank, you have more than enough to pay for a deposit and first and last month’s rent.
You Don’t Necessarily End Up With Bad Credit
Here’s where most people believe a short sale is equivalent to foreclosure. Because you’re selling short on the home, people believe that they will necessarily end up with bad credit. However, if you can sell short, and then quickly raise the funds to pay off the remainder of the house, you can walk away without so much as a ding in your credit history. You should have a look at short sales process in Florida and surrounding areas to find out more.
Then, you can give yourself some time to recoup financially and buy another house that’s a bit more affordable for you.
Meanwhile, with a foreclosure, the sales process is long and drawn out. You’re guaranteed to walk away from the home with trashed credit – no one will lend you money for many years with a foreclosure on your record.
You also may end up stuck with a deficiency judgment where your old mortgage debt follows you around until it’s paid off in full. The bank gets their money either way – except they take the sales proceeds plus the amount you originally owed on the house. It’s like they win twice.
Don’t do that to yourself. Walk away a winner.
Lisa Anders is a busy real estate professional who also loves to write. She researches and shares what she has found on a variety of websites. You can read her helpful posts mostly on real estate and investment websites.