The Benefit of a Short Sale to a Home Owner

Sheri, there is a lot of unknowns about the short sale process. I have read that it can take months to go through and that there is a possibility of streamlining that into a three week period.    

And the big question:  After the short sale is final, can the lender still come after you to collect on the forgiven debt?

Your post is a good little "thought starter" but there is so much more to the short sale puzzle.  And, Craig is correct that a successful short sale for the homeowner MUST include assurance that the debt is forgiven in total.  Although, some short-sellers do agree to sign personal notes for all or part of the deficiency.

Deficiency judgements is indeed pifall #1 for the seller. The lender can file anytime within 2 years.

A good realtor or investor working the short sale needs to ensure the deficiency is released or negotiated to a manageable amount.

NOTE: it is possible to spread out payments over several years, with 0% interest. Many sellers give up without negotiating the deficiency.

That said - short sales is our preferred source for buying properties ... we have time, and most buyers planning to live in the home give up and leave the deal for us to buy at lower prices. Many of the owners want to stay in the property ... and we have a Lease-to-Own program that lets them re-buy it later !

 - The Ronald

Here's an interesting news article that talks about a program that starts in April that will guarantee forgiveness of short sales.

I also remember reading somewhere that the IRS would NOT require short sale sellers to claim the write-off as income. Previously this WAS required and I believe that the new policy is only temporary.

Definitely, ask your CPA!

It is so much better to do a short sale rather than to go bankrupt.