Short Sale Consequences
This is part three of 'What Is a Short Sale".
A short sale is dependent on a buyer making an offer to purchase. If you do not receive an offer, you will not qualify for a short sale. So even if you meet all the other criteria, it is possible that no one will buy the short sale. It is also dependent on the lender accepting the buyer's offer. If the lender rejects the offer, a short sale will not take place.
* Tax Consequences
If the lender agrees to the short sale, the lender may possess the right to issue you a 1099 for the shorted difference, due to a provision in the IRS code about debt forgiveness. Many situations are exempt from debt forgiveness, according to the Mortgage Forgiveness Debt Relief Act of 2007.
You should speak to a real estate lawyer and a tax accountant to determine the amount of short sale tax consequences, and whether you can afford to pay those taxes, if any.
* Blemished Credit Report
A short sale will show up on your credit report. It's a pre-foreclosure that has been redeemed. Short sales affect credit ratings, typically anywhere from 50 to 150 points whereas a foreclosure is typically 300 to 350 points. Find out how the "Short Sale Process" works and "The 8 Steps To A Short Sale"