Thursday, October 11, 2012

Florida Short Sale Fever: Race to Short Sale Before New Year's Eve 2012 and 1099s Start Coming

Short sales can be very, very good for Florida home owners who are facing possible foreclosure by their bank.  A short sale can keep a borrower out of foreclosure lawsuit, for one thing.

Short Sales - How They Can Help You 

Here are some big benefits to a Florida short sale:
  1. A short sale is better for your credit than a foreclosure. You take a hit, but it's not as hard and it doesn't last as long. 
  2. If you have a GSE mortgage (Federal agency backs the note, like Freddie Mac or Fannie Mae), then a short sale may mean you can buy another house in as short as 2 years. 
  3. Lenders are much more open to short sales in 2012 than ever before. Bank of America is really pushing short sales in Fall 2012. 

Short Sales - How They Can Hurt You (Especially After 12/31/12)

Short sales aren't the answer for everyone.  They are "short" by definition, and you have to pay the bank the remaining amount due on the note or negotiate a write-off.   You can be sued even after escaping the foreclosure lawsuit for that deficiency amount unless some law protects you from it (like some GSE regulations).  

Additionally, unless Congress acts, you will have to pay federal income tax on any deficiency amount that is written off by the bank.  Beginning January 1, 2013, unless the federal law is extended ("the Mortgage Debt Relief Act of 2007"), the exemption to deficiencies being considered income will expire by its own terms. 

Which means the time to try and get that short sale done is now, in Fall 2012.

For more information, check out our legal blog About Florida Law on the topic of Short Sales or call us for a free consultation.