Incentives to Perform a Short Sale

From my understanding some of the differences are:

(1) Yes, they can still 1099 you but most do not

(2) You get bruised credit vs. ruined credit

(3) The sellers, know that if the lenders agree, they don't live with knowing the Sheriff will come and throw them out.

(4) You negotiate the sell vs. a court settlement

(5) In a short sale, there's no attorney fees vs. a foreclosure, there's lots

(6) They may be able to buy again in a few years vs. 10 years

I think the process is handled by a professional Realtor is better than just let it go to the courthouse steps.  Plus, overall, I think the process is much better for the economy, the Realtors involved, the Lenders, and our industry as a whole is far better then just sticking their heads in the sand and walking away. 

My understanding is that the effect of a short sale on a Seller's credit report is identical to that of a foreclosure.

In California, purchase money loans are not subject to deficiency judgments; however, hard money loans, equity loans and refinances are.

My understanding on the 1099 is that if its your primary residence then there will be no 1099. Also the IRS guidelines state that if you are insolvent before the debt forgiveness and still insolvent after the forgiveness of debt than no taxes will be due...but this is the same with a shortsale and a foreclosure

There is probably something to the argument that a foreclosure on your credit is worse than a short sale and will it will take longer to recover from a foreclosure, but either way your credit is hurt

Part of the negotiating in a short sale is get the bank to agree not to require a note and  not to seek a deficiency judgement.

This agreement not to pursue a deficienct judgement is, it seems to me, the best arguement  in favor of a short sale.

Phuong,

In one of the discussion on my blog the Attorney Richard Zaretsky from Palm Beach, FL (and an AR member) made an important statement, that whether the Seller gets 1099 or not, by law the Seller is still obligated to declare the difference as income.

By the way, he wrote a series of excellent blogs, yo can find him easily on AR. He helps clarify really important issues.

From the angle of a buyer, a short sale seems like a lot work vs. just buying an REO.  Am I correct?

 Hello, J.P.

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