All About Short Sales

Despite the slow upswing of the national economy, one in every 789 housing units in Illinois received a foreclosure filing in 2014, according to an article published by Bankrate.com. While the national average of struggling homeowners is much higher, at one in every 1,232, Illinois still ranks in the top 10 states with the highest foreclosure rates. Underwater borrowers have alternative options to foreclosure, including a short sale of their home, which involves a sale of the property for less than the balance owed. Nevertheless, consumers should consider all the options and contact an experienced Arlington Heights short sale attorney before moving forward with any decisions.

Disadvantages of a Short Sale

A short sale can be beneficial to both buyer and seller. The former homeowner is able to avoid the foreclosure process, and the buyer is able to find a home well below the market value that is likely not distressed. Nevertheless, short sales are not always a saving grace and not for everyone; below are a few issues that should be considered before moving forward with this alternative to foreclosure.

·           Short sale does not equal spared credit – contrary to popular belief, a short sale isn’t necessarily better when it comes to affecting credit scores. In fact, it shows up as “not paid as agreed” on a person’s credit score, just like foreclosures and deeds-in-lieu of foreclosures, according to MyFICO, a consumer credit reporting website.

·           Even after a short sale, a seller may owe the bank  - known as a “deficiency judgment”, short sales do not necessarily automatically cancel the remaining balance owed on the loan from the bank.

·           If the balance is forgiven, a borrower may owe taxes – the government may consider any amount remaining on the loan by the lender income and, consequently, require payment of state and/or federal income tax. Federal law may allow the exclusion of the amount forgiven in a short sale, but only if specific requirements are met.

·           Other options are available  - short sales often require a lengthy approval process and much sweat equity without a guarantee that the sale will go through. Sellers should consider other foreclosure alternatives such as loan modification, deed-in-lieu of foreclosure, and/or refinancing, before embarking on the short sale process.

·           Short sale approval can be difficult – if there is a second (or third) mortgage on the property being sold, the loan is covered by insurance, and/or other creditors hold liens on the property, approval will likely be needed for all properties prior to short sale approval.

Short Sale Help in Arlington Heights

If you or someone you know is facing foreclosure and considering a short sale as a viable option, contact an experienced and knowledgeable Arlington Heights short sale attorney to learn more about whether or not a short sale is the best alternative. The attorneys at the Law Offices of Gilbert C. Schumm have over three decades of experience counseling homeowners in the greater Chicago area, including Arlington Heights, Palatine, Mt. Prospect and Hoffman Estates. Don’t face foreclosure alone. Call (847) 559 – 9109 today to schedule your initial consultation.