Short Sale: What are the consequences?

July 22, 2011 by The ME Law Firm

Short sales are happening all over Florida and all over the nation.  Realtors are pushing hard for home owners to sale their house and walk away from their debt.  Realtors are not attorneys and may think they have your best interest in mind, but do they?  What are the consequences of a short sale that the Realtor may not be able to tell you about?

1. Judgment.  When a short sale occurs the bank agrees to take less than the amount owed on the house.  The owner of the home is required to find a buyer than they submit the documents to the bank for approval of the short sale.  The amount of debt over the purchase price of the house is a debt the bank can collect from the home owner (the seller).  Unless specifically stated in the contract, this debt is collectable.  You could find a judgment or even a garnishment filed against you.

2. Long Process that might not go through.  The short sale process is a very long process with no promise of ever ending in a short sale.  Many home owners find a buyer and six months later find out the bank will not accept the purchase price or the short sale.  There is no pre-approval process for a short sale.

3. Tax Consequences.  Many home owners do not know that there are tax consequences for a short sale. A seller of the property could find a huge tax bill come April 15th.

4. Losing a valuable asset.  Giving your house away is the same as giving money away.  A house is normally the largest asset owned by a person and they have worked many years to own the house. Yet, every day home owners sign their house away because they believe they do not have options.  You do have options!  Losing a valuable asset should be a last resort, not something to do out of frustration.

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