There is a new trend emerging in Real Estate. We are starting to see mortgage lenders offering incentives to their delinquent borrowers to participate in a short sale instead of letting their home go to foreclosure. At a closing I attended for my buyer today, the seller's lender had approved a short payoff to allow him to sell his overleveraged home at market value and to cover his closing costs and Real Estate commissions. On top of that, they rewarded him with $20,000 cash at closing and completely waived his liability on the remaining balance of the loan!
It seems that now is the optimal time to sell if you are upside-down on your mortgage and can't afford the payments. There are a number of incentive programs like this one available that offer cash at closing and a full deficiency waiver. Also, the market seems to be picking up and there are plenty of good buyers that are willing to wait for a short sale to be negotiated. Another consideration is that there is currently a moratorium on the requirement of sellers in short sales having to claim their forgiven debt on primary residences as income. That moratorium is scheduled to expire at the end of 2012, so there are tax advantages to selling short this year as opposed to next year.
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