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Short Sale - How it Affects Your Credit
Many Bradenton - Sarasota, Florida homeowners are facing the risk of foreclosure in our declining market. For some, a short sale may be the solution. In a short sale the lender agrees to accept less than the current mortgage balance rather than take the property back through foreclosure.
In most cases the lender will issue a 1099 to the borrower for the forgiven debt. The borrower may owe taxes on this amount. There is current legislation that would eliminate the tax on mortgage relief. I advise you to consult with your tax professional about the status of this issue.
How Does a Short Sale Affect Your Credit?
The credit score of the seller will take a bigger hit by going through foreclosure or giving a deed-in-lieu of foreclosure than with a short sale. The consensus is that a short sale may result in a loss of about 100 points on the borrowers FICO score. A foreclosure or deed-in-lieu of foreclosure may result in a lost of 250 points of more.
Also to be considered is how long a borrower must wait before they buy another home. A foreclosure may force the borrower to wait as many as 36 months before they can comfortably buy again. However, with a short sale, the borrower can buy again in about 18 months.
Most people, when faced with the possibility of foreclosure, find a short sale to be a better solution. In my previous posts I covered all of the options that a Bradenton, Florida homeowner needs to consider. I always recommend that the homeowner discuss their situation with their attorney and their accountant.
Dan Forbes is the broker/owner of Premier Team Inc., Realtors, in Bradenton, Florida. He has assisted over 1000 Bradenton, Florida real estate buyers, sellers, and investors. He is also president of the Bradenton Real Estate Club. BradentonFloridaRealEstate.com and TheRealEstateZoo.com Dan is an author, speaker, and seminar leader as well as an active Realtor working with Buyers and Sellers.
Source: www.articledashboard.com