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Understanding Short Sales Let our team help you... Call Celeste (951) 317-5571 As foreclosure rates hit record levels, more sellers are turning to short sales as a way to avoid foreclosure. So, how does it work? In a short sale, an arrangement is made with the mortgage lender(s) to accept a price that's less than the amount owed on the property. As part of this arrangement, the lender typically agrees to forgive the rest of the loan. As a result, the seller doesn't have to go though a foreclosure, and the lender avoids taking on the burden of unloading the property.
While short sales may still impact the seller's credit, not as much as a foreclosure. Foreclosures may stay on the home owner's credit up to 7 years! Note: Short Sale Tax Liability may now be WAIVED! - The property must be the principal residense of the taxpayer.
- The forgiven debt must be "acquisition debt." Acquisition debt is defined as debt incurred in acquiring the residense.
- The taxpayer must be able to show the forgiveness of debt is directly related to a decline in the value of the residense or the finincial condition of the taxpayer.
- The non-taxable amount of forgiven debt is $1,000,000 for a single taxpayer, and $2,000,000 for a married couple filing jointly.
* Always consult a CPA or Tax Consultant to discuss your individual situation. Summary: In a short sale, a seller facing potential foreclosure strikes a deal with their lender to accept less than they owe on the property, in exchange for avoiding foreclosure. |
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