Short Sales: Why They Can Be Good Or Bad

In hard economical times, there are many who struggle to pay their mortgage payment

. Whether it was a sudden job loss, extended unemployment, mismanagement of the family funds or any other reason, many homeowners will need to look at the option of a short sale at some point in their lives. A short sale is often considered a solution because it is a situation in which the lender who owns the lien on the house will agree to take less than is owed on the current loan. While it can be a solution, it can also be a problem. Every homeowner should understand both the pros and cons of a short sale.

The obvious pro of a short sale would be that a homeowner would avoid foreclosure and the many other problems associated with it. It is no secret that foreclosure can do a number on someone's credit score. It can also take months and months to complete. The fact of the matter, though, is that short sales, while they are not as hard on a credit score as foreclosures are, can still damage credit. This means it can still be difficult to purchase a home after a short sale has been completed.

Another pro of a short sale would be the emotional stress and frustration that can be spared by getting out of the high payments altogether. After all, a foreclosure can take a full year sometimes. Short sales often take less time and therefore cause less emotional stress which of course makes them far more appealing than the alternative. One con, though, that is hardly mentioned with short sales is the fact that there could be severe tax consequences. A 1099 could be issued from the lender that forgave the debt for the remaining balance of the loan that did not get paid off. This is a sneaky way to get more money out of people who are trying to evade paying their mortgage.

Not everyone can qualify for a short sale. Usually, lenders do a thorough evaluation of the homeowner's financial situation. Resources, savings and assets are all considered when a short sale is proposed. Those who have enough resources, savings and assets will most likely be denied the opportunity of a San Diego short sale and will therefore go straight into foreclosure. Something else that makes short sales not very appealing is the fact that lenders often make it difficult to get one to go through with their slow communication. Indeed, there are both pros and cons to short sales. It's important to get the facts before making such a big decision.

by: Art Gib

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