Short sales are the latest trend in Arizona’s depressed real estate market. As foreclosures rise, lenders are motivated to do the sales because they at least get most of what they are owed.
Although most lenders prefer short sales because foreclosures cost them time and money, some banks and lenders are still hard to work with and short sales can take more time than a traditional sale.
Homeowners don’t get any equity from the sale, but they also don’t get a nasty foreclosure mark on their credit report.
One thing many people don’t realize is that there is often a tax penalty that goes along with foreclosure. What happens is, if the house sells for less than the amount owed, the rest of the loan balance is considered “forgiven.”
The IRS looks at this as income because it is something you would have had to paid but are getting out of. As a result, you may be taxed on the difference between the amount you owed and the amount the house sold for.
If it looks like you will not be able to work out a way to keep your home, some lenders will offer a “deed in lieu of foreclosure” or “cash for keys.” If you can get your lender to pay you to move out quickly and leave the home in good condition, that could help you pay the cost of moving into a new home. However, a deed in lieu of foreclosure usually has about the same effect on your credit rating as an actual foreclosure.
A homeowner who has chosen a short sale rather than let the property go to foreclosure will see only a 80 to 100 point drop on their credit score. A foreclosure is a 250- to 280 point drop. A big difference if your goal is to be able to purchase again any time soon.
Avoid short sale or foreclosure scams.
Winsor law Group attorneys and staff work hard to ensure our clients understand Arizona’s Anti-deficiency laws and are protected from any further claims from the property in the future.
