In today’s housing market, many people are upside down with their mortgages. Not to mention, many homeowners have an adjustable rate mortgage (ARM) with a skyrocketing payment. As a result, there are people who approach me with this basic of question:
Should I do a short sale or let the house go in foreclosure? The question is not easy to answer. In a short sale (also sometimes called a quick sale), you are agreeing to sell your house back to the bank at a reduced price. In addition, with a shortsale, you may have to pay taxes on the amount you were forgiven, the write-off. Talk to your CPA or enrolled agent about the tax consequences of this.
A foreclosure, on the other hand, is where the bank takes possession of the house again. In some ways, it’s like car repossession. However, unlike car repo, there are many statutory requirements about notice and such that the mortgage servicer has to abide by which are beyond the scope of this article.
The thing to get out of a foreclosure is that, unlike a quicksale, you won’t owe additional income taxes if a foreclosure happens on your residence, thanks to the Mortgage Forgiveness Act that President Bush signed into law last year.
Also unlike a short sale, there is no aggressive and extremely hungry real estate agent seeking a commission off your transaction. Are they looking out for you?
Short sale: Realtor gets commission, possible tax bill to IRS, no leftover debt roller-coaster ride. Foreclosure: No realtor, no tax assessment or 1099, credit hit, possible collection for unpaid mortgage.
A bankruptcy could stop the collection of the unpaid mortgage and remove any lingering debt owed on their lien, eliminate the other debt you have, and get you a fresh start, tying this all up in a neat little bow. Call to set up a consultation for more information.
Something to remember: without additional action, you cannot sell or transfer your property in a bankruptcy!
There are no easy answers. No bankruptcy attorney or judge can change your mortgage payment or payoff. However, if you want a fresh start, no property tax debt, and want to move on, a bankruptcy might be the way to go.
Hale Andew Antico is an attorney who specializes in consumer debt and helping people get a fresh start. His website is at www.scvbankruptcy.com and he can be reached at 661-252-9900. He has been a proud SCV resident since 1975.