Mortgage Short Sale
What is a mortgage short sale in Cedar Rapids? Isn’t that what happens when you come up short on a mortgage payment? Perhaps it is selling your house with only a short time left on your mortgage. A mortgage short sale occurs at the sale of property by a financially distressed borrower for less than the outstanding mortgage balance. The lender accepts the proceeds of the house sale and which is short of the full repayment of the mortgage. The lender releases the borrower from the mortgage obligation and does this to avoid what would amount to larger losses if it were to foreclose on the mortgage.
NOLO says saving your credit score may be the most touted reason for a mortgage short sale of your home. However, according to myFICO, short sales, foreclosures, and deeds-in-lieu of foreclosure are all “not paid as agreed” accounts and are considered the same for purposes of your FICO score.
A Mortgage Short Sale Don’t Always Cancel the Remaining Debt on the Mortgage
When a lender approves a mortgage short sale, what does the lender agree to do? At the very least, the lender agrees to remove or release the lien on the property. A seller would have a near impossible task in selling a property without this lien release.
Is the lender also agreeing to cancel the seller’s obligation to repay the loan in full? Not necessarily
Suppose you sell your house that has $200,000 in debt and you sell the house for $150.000. That leaves a $50,000 deficiency. Some lenders ask sellers to sign new, unsecured promissory notes before approving the short sale. Other lenders, without asking for new promissory notes, reserve their right to collect the deficiency — the remaining balance of the debt.
In Iowa, there is no law prohibiting a lender from obtaining a deficiency judgment following a short sale or deed in lieu of foreclosure.
You May Owe Taxes on the Deficiency
If your lender forgives you for a deficiency, after a mortgage short sale, you may owe taxes on the forgiven amount. That’s because it’s considered income by the IRS, upon which you may owe federal and state income tax. Under the federal Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude from your income all or a portion of the amount of forgiven debt in a short sale.
Hire an Attorney to review all documents
Short sales are complicated transactions. We recommend that you hire an attorney to review the documents. The release of lien and protection from tax deficiency are very important to your financial welfare.
Harmony Property Solutions, LLC is here to help homeowners out of any kind of distressed situation.
As investors, we are in business to make a modest profit on any deal. However, we can help homeowners out of just about any situation, no matter what! There are no fees, upfront costs, commissions, or anything else. Just the simple, truth about your home and how we pay cash for houses Cedar Rapids.
Harmony Property Solutions, LLC is part of a nationwide group of thousands of investors who are helping tens of thousands of homeowners every year. We may not be the “traditional” route, but we CAN help, and we can do it quickly!
Give us a call today at 319-343-6773 to let us know how we can help YOU.