Real Estate Short Sales

Foreclosure isn't something that most homeowners enthusiastically or willingly allow to happen. In fact, most people will do just about anything - including working two or three jobs and renting out space in their home - in order to avoid it. Unfortunately, the unique situation of today's housing market has prompted more unavoidable foreclosures than ever. These days, many people are underwater with their mortgage loans to the tune of tens of thousands or hundreds of thousands of dollars. For them, selling their homes and downsizing just isn't an option - but foreclosure's not the only way, either. Instead, a short sale can bring many benefits to a seller; read below to find out what they are.

Doing the Right Thing

The foreclosure process completely strips control away from a homeowner. As soon as the ball is rolling on a foreclosure, the borrower has very little say about what unfolds. Even if the foreclosure has been precipitated by serious and unsolvable financial woes, it's only natural for a person to feel guilty and irresponsible for it. A short sale is a much more proactive course of action, allowing a borrower to take the reins in many ways. Better still, a short sale allows a homeowner to avoid the guilt and stigma of a foreclosure.

Reducing Tax Liability

The specific tax benefits of engaging in a short sale vary from one person to the next. However, there is one very simple benefit that generally applies to all short sale sellers. Whether it's a short sale or a foreclosure, the bank will most likely forgive the unpaid portions of the debt. In turn, they will file a 1099-C with the IRS for the amount of the unpaid debt; the homeowner may have to report that amount as taxable income. That amount is likely to be much lower with a short sale, though, so borrowers can save big in that way.

Softening the Credit Rating Blow

For most people, the most troublesome aspect of going through foreclosure is knowing that they will be unable to even think about buying a new home for several years thereafter. Indeed, foreclosure leaves a huge black mark on a person's credit report; the impact can be felt for several years. Although a short sale won't protect a borrower's credit completely, it won't have as negative of an impact on it, either. In fact, if a borrower wasn't severely delinquent on the mortgage leading up to the short sale, credit damage could be quite minimal.

Reducing the Amount of Money Owed After Sale

Sometimes, the only way of getting a bank to agree to a short sale is by taking responsibility for some of the money that will be owed after it is complete. Even if this happens to a borrower, though, the amount that will be owed will still be significantly less than what they'd have lost in selling the home the traditional way. Instead of owing tens of thousands of dollars, for instance, the borrower may only be responsible for a fraction of the amount. By working out an arrangement for the remaining balance due, a borrower can avoid the more serious consequences that go along with a foreclosure, too.

Short Sales: Viable Alternatives to Foreclosures

Whether it's through a short sale or a foreclosure, losing a house can be a very unsettling and upsetting experience. Still, the blow can be significantly softened by going the short sale route. When the pros and cons of each method are weighed, short sales always come out on top. Sellers who are serious about wanting to go the short sale route should do their research so that they get approved for this attractive alternative to foreclosure.