Understanding our market can be challenging today so I wanted to touch base a little bit on short sales.  By now, you have heard the term short sales and simply put it means you owe more to the bank then your home can sell for. For all the homeowners who are upside down and can no longer make their mortgage payment (because of either a job loss, divorce, or an option ARM that’s resetting higher, etc), up to now the only option was, well, letting the bank foreclose. That’s not a good option since a foreclosure sticks on your credit record for at least 10 years. That’s where short sales come in. If your bank agrees to a short sale, you then hire an agent to find a buyer for the house, you sell the house for a loss, and with the bank’s blessing, they agree to eat the loss (although they could still demand the homeowner make some kind of payment or share the loss), and be prepared that if your bank does absorb the loss, the IRS might treat that as taxable income so talk to your CPA to get all the facts on how this effects you. Short sales also leave a mark on your credit report but it doesn’t hurt as much a foreclosure. Just make sure you know all the facts and what your options are. I would also suggest going to http://www.irs.gov/individuals/article/0,,id=179414,00.html to read about the Homeowner Forgiveness Act, it has some very good and important information.

Of course, the better option is to find some way to stay in the house—by first, seeing if the lender is willing to restructure the loan (called loan modification), or forgo a couple of monthly payments to help you get back on your feet. Apparently, more and more lenders are willing to make accommodations to avoid taking the property back. Banks hate to take over homes, especially in a declining market, so you shouldn’t underestimate the willingness of a bank to make concessions. The best thing you can do is call you bank, explain your situation and ask them what they can do to help you. Give me a call 360-631-2108 I would be happy to discuss the different options you have or email me at tamara@thelamoreteam.com and in the subject line put “options before Foreclosure”. Also, please indicate if you would like a copy of the Homeowner Forgiveness Act.