My client is in the dilema of wether to go for short sale or let it go into foreclosure. They have a second home that was bought as an investment. Unfortunately with the real estate market the way it is, the property is rented out for much less than the cost of mortgage, taxes and maintenance. Sounds familiar ??? Of course they are one more in the bundle of short sales and foreclosures.
But in reality I wanted to hear from people who have really gone through the process of either one and hear from hands on experience what they were asked to do in a short sale and the paperwork required.
There are a lot of rumors and I know each bank works in a unique way. But one of the scary thoughts is that you go the short sale route and then they come after anything you have and deplete your savings. In a foreclosure you give up your good credit but it ends there. In a short sale....how far does it go ? Especially when the property is a second home and not the main residence?
I also understand, and I would need to confirm with an accountant, that the money that you owe (the difference between the mortgage debt and the short sale price) will be added to you as income received for that year. So in essence you end up paying taxes on it, which I am sure most people don't realize.
Since there are so many rumors and this is so new, does anyone know with details what happened to their clients after the short sale and during the process? I would appreciate hearing hands on.
Thanks and good luck to all in this difficult market....hang in there !!