In the Spotlight: California Short Sale Part 1

Understanding what a short sale is and how it affects your credit.



Short Sale Transactions:



What is a short sale? Is a sale of real estate property in which the outstanding debt (ie: mortgage’s) you owe are more than what the property is worth. In turn the bank/lender will assume a loss and take an offer from a buyer for less then what you owe.



Keep in mind that you could still be liable and could be sued by the lender/bank for the money that was "forgiven". However the amount you did not pay back, which is a form of "debt forgiveness" may be taxed by the IRS. Please visit the IRS website more information on the The Mortgage Forgiveness Debt Relief Act and Debt Cancellation



If you have other liens, such as a second mortgage lien or even a third, the holder or those notes may also file a deficiency judgment in civil court against you. Even thought the first lien holder allowed the debt forgiveness.



These are just three major consequences of choosing to sell through a short sale.



Therefore, it is very important that you seek:



1.A licensed and qualified real estate agent to represent you in these types of transactions. To determine if the person is licensed by the California State Department of Real Estate



2.The advice of an accountant. To obtain the status of a Certified Public Accountant or a Public Accountant, please visit the California Department of Consumer Affairs



3.The advice of a lawyer. To obtain the status of an attorney, please visit the State Bar of California



Remember a short sale may stay on your credit for a number of years, and may hinder you from purchasing a home down the road. It is important to keep paying other debt you have on time and to reestablish good credit as soon as possible.