Yesterday we began what we're hoping will be a dialogue with you, based on Keeping Current Matters' discussion of short sales and a lot of the myths surrounding them. Gil and I believe this is a critically timely issue, because so many people really don't know the many differences between a short sale and a foreclosure.
We started out by defining a “short sale;” in the simplest of terms, it's when the bank that holds your mortgage agrees to accept less than the amount you owe on the property, in order to avoid foreclosing on it. We noted that you absolutely must qualify for a short sale, which essentially means that (1) you can prove you've suffered a really severe financial hardship that's keeping you from making the same income you had when the loan originated and (2) your house is worth less than you owe on it.
Then we dispelled some of the most common myths that people hold about short sales. Check out yesterday's blog for that information; today we're going to move on to clear the air further by providing even more facts about the differences between the two possible outcomes (short sale or foreclosure).
This one's a biggie: For the vast majority of people, it is absolutely NOT true that if you let your home go into foreclosure, you can just walk away and be done with the situation (including having that coveted “clean slate”). You could, in fact, be responsible for the difference between the amount owed on the property and the price paid at auction (called a deficiency balance). This liability varies from state to state; call us and we'll fill you in on the New Jersey specifics. You could also end up with a tax liability (to the IRS). There are some exemptions, and we're not CPAs, so if you're thinking of doing this, you should absolutely consult a tax professional! The good news is that in most cases, a short sale will alleviate your liability with the bank for that deficiency balance.
Too many people are still going on the false assumption that short sales are really uncommon. Right now, short sales account for 10-50% of sales across the country, and experts are predicting 2012 will account for more short sales than any other year to date. We've said it before: If you're in this situation, YOU ARE NOT ALONE. The economy is affecting everyone, from every walk of life. There are millions of Americans in the exact same boat. Short sales are happening everywhere across the country (including right here in central New Jersey!), and they're not limited to any particular income class. A short sale is nothing more or less than a helpful tool; it's not a negative stigma.
Stay tuned; tomorrow we'll wrap up this series on short sale misunderstandings. You won't want to miss it!
The Marchany Team KNOWS central New Jersey. We're right where you are, whether you're in South Brunswick or Monroe (Middlesex County). If you're looking for a terrific new home in Mercer County, we're prepared to search for your place in the sun in Princeton Junction, East Windsor, West Windsor, and Robbinsville. And if you're ready to put your Franklin Park or Hillsborough (Somerset County) home on the market, we're prepared to find the buyers who are looking for your home. Call The Marchany Team today at (732) 997-0019, and don't forget to “Like” us on Facebook! We are dedicated to helping you in every way possible.
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