Define a Mortgage Short Sale

Isn’t that what happens when you come up short on a mortgage payment? Perhaps it is selling your house with only a short time left on your mortgage.  Or maybe a garage that is too short to fit the average car.

Actually, a Mortgage short sale occurs at the sale of property by a financially distressed borrower for less than the outstanding mortgage balance. The lender accepts the proceeds of the house sale and which is short of the full repayment of the mortgage. The lender releases the borrower from the mortgage obligation.  The lender does this to avoid what would amount to larger losses for the lender if it were to foreclose on the mortgage.

NOLO says saving your credit score may be the most touted reason for a mortgage short sale.  However, according to myFICO, short sales, foreclosures, and deeds-in-lieu of foreclosure are all “not paid as agreed” accounts. They are considered the same for purposes of your FICO score.

Short Sales Don’t Always Cancel the Remaining Debt on the Mortgage

When a lender approves a mortgage short sale, what does the lender agree to do? At the very least, the lender agrees to remove or release the lien on the property. A seller would have a near-impossible task in selling a property without this lien release.

Is the lender also agreeing to cancel the seller’s obligation to repay the loan in full? Not necessarily

Suppose you sell your house that has $200,000 in debt and you sell the house for $150.000. That leaves a $50,000 deficiency. In California, the lender cannot come after you for a deficiency, in most cases.

Hire an Attorney to review all documents

Since short sales are complicated transactions,  we recommend you hire an attorney to review the documents. The release of lien and protection from tax deficiency are very important to your financial welfare.

You May Owe Taxes on the Deficiency

If your lender forgives you for a deficiency after a mortgage short sale, you may owe taxes on the forgiven amount. That’s because it’s considered income by the IRS, upon which you may owe federal and state income tax. Under the federal Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude from your income all or a portion of the amount of forgiven debt in a short sale.

Coal to Cash Homebuyers, Inc. will buy as-is.

An investor will estimate the repairs needed to restore your property, arrive at an offer, and will purchase the property as-is.

When we buy houses fast, there are no fees!  We don’t charge you a real estate commission, and we may take care of any other nagging financial problems such as back taxes, code violations, or past due water and sewer bills.

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