There are still numerous residential properties here in Florida that are distressed because their owners were victims of the housing market crash. As many homeowners face the possibility of foreclosure because they are unable to make their mortgage payments, either a realtor or their mortgage lender could approach them to take part in a short sale. This method could stop home foreclosure, but it would be a good idea to understand the implications of a short sale on the homeowner before beginning the process.
In a short sale, a home is sold for less than the homeowner owes on it. Realtors may suggest a short sale because, even though it may require more work on their part, they still receive a commission on the sale. Lenders may suggest a short sale because they do not want to end up owning the home and paying the expenses that go along with its upkeep — including taxes — that go along with putting it on the market.
If your home is sold as a short sale, the lender will first need to agree on the sale price. This could take some time during which time you are still responsible for the homes maintenance, taxes and other upkeep. Further, if the lender forgives the remaining balance of the loan, you could end up paying taxes on that amount because it is considered income by the IRS. In the alternative, the lender may require you to sign an unsecured promissory note for the remaining balance as a condition of the sale.
Before agreeing to a short sale in order to stop home foreclosure, consult with a Florida attorney. Having a full understanding of the process and how it will affect you can help you make the decision. If you agree to go forward, your attorney can help negotiate with the lender, document the sale and assist with any other tasks associated with it.