A short sale occurs anytime the value of a property is less than the amount owed to the lender and the lender agrees to write off the difference. Sellers have the option of selling the home and paying the difference to the lender, walking away and giving the house back to the lender or making a deal with the lender to accept less than the loan amount. This last option is a short sale. There are currently 3788 listings in the Great Las Vegas Multiple Listings in Henderson, North Las Vegas and Las Vegas identified as short sales.
A short sale may be reported to credit bureaus which would show as money owed from the borrower after the short sale is complete. This will make obtaining a new mortgage very difficult. A seller may be able to negotiate what is reported on their credit. It is a good idea to talk this with over with the lender.
The IRS will classify any loan forgiveness – that is, the difference between the payoff and the actual loan amount – as taxable income and the Seller will receive a 1099 from the lender. Sellers should discuss the tax ramifications of a short sale with their tax professional.
Faced with a short sale situation, it is important to be honest with the lender. A conversation with the loss mitigation department is essential to begin the process of a short sale. If you are uncomfortable about doing this, ask your real estate professional to make the call with you.