With the changing housing market, the topic of “Short Sale” is being brought up on Realtor message boards. Here’s what a Short Sale is….
Say a homeowner can’t make their mortgage payments. They put the house up for sale and get an offer that, when all costs of selling the home are deducted, is lower than what they owe to the lender. Instead of going into foreclosure, the lender accepts the lower amount.
The reason lenders would entertain something like this is because of the costs associated with the foreclosure process. There is a gothca’ though. The amount the Seller is short is viewed as taxable income to the Seller.