Understanding Short Sale Implications
By working with Kalomar on your short sale, you are setting yourself up to make the best of a bad situation today; and more importantly, you are setting yourself up for a better and brighter future. Your legal and tax advisers are going to work with you to identify any potential negative implications to your short sale transaction and help you avoid them.
The possible implications of a short sale include mortgage deficiency, taxes, and credit.
Mortgage Deficiency
A mortgage deficiency is the difference between the loan amount owed by the borrower and the purchase price of the short sale paid to the lender. In some states and some instances homeowners are protected and lenders can’t pursue them for the deficiency. However, in some cases a short sale can leave you owing a substantial debt, which can be collected by garnishing your wages or other aggressive collection actions.
Solution: Kalomar will get your deficiency waived as a condition of the short sale.
Taxes
When your loan obligation is waived, the amount of debt forgiven may be taxable. The Mortgage Debt Relief Act of 2007 allows several exclusions that exempt this income from taxation through 2012. However, if the property is not your principal residence or you have taken cash out at purchase or refinance, you should consider your situation carefully. Learn more about the specific exclusions in IRS Publication 4681. A properly structured short sale will help mitigate your tax obligation.
Solution: With Kalomar, you’ll have access to a tax adviser who will consider your particular circumstances and advise you on these complicated issues to ensure you manage your tax situation.
Credit
Short sales typically prevent you from buying a new home for two years under the new Fannie Mae guidelines. A bankruptcy, foreclosure, or deed in lieu is likely to prevent homeownership for much longer.
Solution: Kalomar will use all available avenues to protect your credit rating to the greatest extent possible. In the worst case, according to current Fannie Mae Guidelines, a short sale will impact your ability to qualify for a new home for only two years. In addition, If you have good credit and buying a house sooner is important to you, we may be able to work with your attorney to use legal means to protect your credit from any negative consequence.
