More than 300 Anne Arundel County properties currently are in short sale status
Homeowners in the area struggling to meet their monthly mortgage payments should know that there are options to help alleviate this financial burden. With more than 300 Anne Arundel county properties currently in short sale status, it’s important to understand the benefits of the real estate short sale process.
To review, short sales are a type of real estate transaction under which the lender, typically a bank, agrees to accept less than the amount owed on the homeowner’s mortgage. Short sales are a common strategy for homeowners who are “underwater” on their mortgage, are behind on their payments and have unsuccessfully tried to refinance their properties.
A short sale does not always make the remaining amount owed on the mortgage disappear. However, a short sale avoids foreclosure on the homeowner’s property, and in doing so can greatly reduce financial damage to the borrower’s credit.
Some of the benefits of a short sale include the following:
1. Short sales are an alternative to foreclosure. As unpleasant as a short sale might be, it’s far more preferable than going through foreclosure. Foreclosure usually devastates your credit, leaving you with all kinds of financial problems, from paying higher premiums on insurance, to losing access to credit cards and even missing out on job offers from employers who use bad credit scores against applicants.
2. Short sales soften the damage to credit. Although a short sale will not protect a borrower’s credit completely, the negative impact will not be as severe. In fact, if a borrower isn’t severely delinquent on the mortgage leading up to the short sale, credit damage may be minimal.
3. Short sales lower the homeowner’s after-sale debt. Short sales don’t always completely eliminate the amount of money owed to the lender after the home sale. But the amount owed will be significantly less – perhaps tens of thousands of dollars less -- than what would be owed if selling the property through a conventional sale.
4. Reduced income tax liability. The tax benefits of pursuing a short sale vary depending on the homeowner’s tax situation. However, when banks forgive the homeowner’s unpaid portion of the debt, the homeowner may have to report that amount to the Internal Revenue Service as taxable income. That amount is likely to be much lower with a short sale than with a foreclosure, thereby reducing the homeowner’s income tax bill.
5. Short sales lessen the stigma of financial failure. Even when homeowners fall behind on their mortgage for valid reasons, there’s often a sense of shame or guilt relating to the unpaid debt. Compared to foreclosures, short sales are seen as a more proactive course of action, allowing homeowners to have much more control over and input in resolving their loan obligations.
For more information on whether a short sale might be right for you, contact a reputable real estate or mortgage professional.
Jerry Kline is a Realtor with the Odenton, Md., office of Keller Williams Flagship Realty (1216 Annapolis Rd., Odenton.) For more information on the local real estate market, contact him at (443) 924-7418, or visit his blog (www.JerryKlineRealtor.wordpress.com) or website (www.JerryKline.kwrealty.com).