Neves & Cashman Realty
Independently Owned & Operated
1-877-990-7775
New Bedford Office
355 Union Street
New Bedford, MA 02740
355 Union Street
New Bedford, MA 02740
What is a Short Sale : What are the Consequences?
1. Definition of a Short Sale
- A homeowner is “short” when they owe more on their property when the combined sale price, commission and closing costs exceeds the current market value.
- A short sale occurs when a negotiation with your lender or lenders to accept less than the full balance of the loan at closing. A buyer closes on the property and the property is “sold short”.
2. What are the Consequences of a Short Sale?
a. Cancellation of Debt Tax Liability
“Phantom Tax”
- Mortgage Forgiveness Debt Relief Act of 2007
- Special IRS Section
b. Deficiency Judgment
- Lender Collection Rights
c. Other Issues
3. Mortgage Forgiveness Debt Relief Act Of 2007
- Originally HR3648
- Prior to passage any debt forgiven was “cancelled” as was required to be claimed as 1099 income
- Signed into law December 20, 2007
4. MFDRA Details, Phantom Tax
January 1, 2007 to January 1, 2012
- Eliminates Phantom Tax
- Debt must have been incurred acquiring a principal residence
- Cancelled debt up to $2,000,000 is eligible
- Sets rules for determining the allowable amount for the exclusion for taxpayers with non-qualifying indebtedness and taxpayers who are insolvent
5. Deficiency Judgement
- In 100% of foreclosures homeowner is exposed to a Deficiency Judgment
- In some Short Sales lender waives right to Deficiency
- In almost all cases a short sale will result in lower possible deficiency judgment
CONTACT WEICHERT REALTORS
A short sale is a sale of real estate in which the proceeds from the sale fall short of the balance owed on a loan secured by the property sold.
...learn more on how purchase a short sale.
Neves & Cashman Realty - Although home to New Bedford and neighboring towns like Dartmouth, Fall River, Taunton, Fairhaven, Westport, Acushnet, and Freetown; the professional and experienced Weichert Real Estate Agents cover all of Southeastern Massachusetts and Cape Cod.