How will a short sale affect me?
Consequences of a Short Sales
Yes, there are consequences of a short sale, but they are way less severe than a foreclosure. A foreclosure is the ‘atomic bomb’ of credit hits.
The consequences of a short sale may include the following:
- Deficiency judgement- bank sues you for the difference of the amount the house sold for and the amount owed. For example, if you owed $120,000 and you house sold for $100,000 via short sale, then the bank may sue you for the deficiency of $20,000.
- 1099- if, as in the scenario above, you have a deficiency of $20,000, then the IRS may consider this $20,000 as income. Their logic is that if you didn’t pay it as an expense, then it is income, and you may be taxed accordingly.
- Drop in credit score- most likely a short sale will drop your credit score anywhere from 80-150 points. It’s not an exact science but the higher your starting credit score, the more it will drop.
However, all of these circumstances are better if you go through a short sale rather than a foreclosure. In a short sale, you may be able to negotiate against a deficiency judgement where you have no chance in a foreclosure. You may be able to improve your credit score quicker and qualify for an FHA home loan quicker with a short sale on your credit score as compared to a foreclosure.
With over 1,200 real estate transactions performed since 2003, there is very little that Hippie Hollow Homes hasn’t experienced, especially when it comes to helping home owners sell their house fast.