http://A-ZSHORTSALES.COM Here in Kissimmee & Orlando, FL short sales are very common in our market place. I will review with you 5 basic questions that are commonly asked.

1. What is a short sale?
A short sale is when a sellers home is being sold for less then what the current mortgage balance is owed. In order for a short sale to be possible it will be subject to third party approval which is the sellers lender. The sellers lender ultimately will have to agree to allow the home to be sold for less than the mortgage balance owed.
2. Will the seller’s credit rating be affected by a short sale?
While the short answer to this questions is yes, it will be. However there are other so called foreclosure alternatives that may have a greater impact on your credit for example bankruptcy or just letting the home go to foreclosure.

3. If a seller is in bankruptcy, will that affect the short sale of the property?
Absolutely, most lender would not consider a short sale if the homeowner is in the middle of a bankruptcy proceeding. a short sale between the parties is considered a collection activity and such a negotiation is prohibited in bankruptcy. If you have claimed bankruptcy and want to short sale your home it can be done once the bankruptcy has been discharged.
4. Are there tax implications when short selling a home?
circumstances are individual to the lender. As a short sale represents a loss for the lender, they can report the amount lost a debt forgiveness to the seller. If a formal tax form 1099 is filed, the seller may be responsible for paying taxes on the amount of debt forgiveness. However every short sale is unique and each lender short sale approval should be read carefully as there have been many times where lenders have given complete debt forgiveness.
5.Why would a lender allow a short sale to occur?
Plain and simple it cost them far less money than having to file a foreclosure proceeding. Remember the banks do not want to own homes.
Visit us at www.a-zshortsales.com

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There may be tax ramifications to a Short Sale but this is a very “loaded” question. You may have heard, “Don’t do a short sale because you will get a 1099 and have to pay taxes on the difference between what you owed on your home and what you sold it for or the amount the bank wrote off.” This may be true, but this is not the whole story…

If you borrow money from a lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

The thing that most people don’t know or don’t tell you is that with a Foreclosure, you will also get a 1099. In the case of a Foreclosure the 1099 is called a “1099-A.” So what’s the difference between a 1099-C and a 1099-A? The ‘C’ stands for “Cancellation of Debt” and the ‘A’ stands for “Acquisition or Abandonment of Secured Property”. The differences are much more than you get the ‘C’ with a Short Sale and the ‘A’ with a Foreclosure. It is important to know that while there are many differences, the tax consequences for the ‘C’ and the ‘A’ are the same. You may not even be required to pay taxes on the ‘income’ as shown on the 1099-C, but don’t just assume that you won’t have to pay. While we are very good at successfully closing Short Sales, we are not tax experts.

Before making your final decision, first consult a CPA or Tax Preparer .

The Mortgage Debt Relief Act of 2007 provides relief to many, many homeowners. For more information on the Mortgage Debt Relief Act, how it works, who it applies to, and more, please read more directly from the IRS at www.irs.gov.
One more thing you should know is that in approximately 99% of the cases, the amount of the loss at Foreclosure is greater than that of a Short Sale. If you are going to receive a 1099 in either case, it is in your best interest to do a short sale instead of allowing your property to be sold for less at Foreclosure or as an REO (Real Estate Owned or Bank Owned Property). Now that you know this, don’t allow rumors and incorrect information to influence an important decision in your life. Losing your home to Foreclosure is always the last resort and you should seriously look at all of your options before letting your home go to Foreclosure.

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