Dear Sue,
I owe $300,000 on my house. Based on what my neighbor’s house just sold for, I think that my house is worth $225,000.
Because of all the good deals, I would like to sell and buy a nicer house for less money.
Would I qualify for a short sale?
~ Excited Ed
Dear Ed,
Just because you owe more than your house is worth doesn’t mean that you have to sell it.
If you can make the payments and have no extenuating circumstances such as divorce, death of a spouse or job transfer, just stay put.
Dear Sue,
Our adjustable loan just went up. The payment is now more than we can possibly make.
When we got the loan we were both working and figured that we could easily make a higher payment.
Things have changed. My wife is the only one working at this time. I get unemployment but it’s just not nearly enough.
Should we consider a short sale?
~ Scared Silly
Dear Scared,
Try a loan modification first. Call your lender immediately.
The Obama administration is determined to get as many loans modified as possible under the Making Home Affordable program.
Dear Sue,
I am thinking about a short sale.
I have heard that I will have to pay tax on the difference between what I owe and what my home sells for. I heard that the amount would be viewed as income. Is this true?
~ Inquiring Ida
Dear Ida,
Borrowers that qualify under the Mortgage Forgiveness Debt Relief Act of 2007 no longer have to report their debt relief as income.
To qualify under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven or cancelled debt had to be used to buy, build or substantially improve one’s principal residence or to refinance debt incurred for those purposes.
Before continuing seek legal and tax advice.
Dear Sue,
My son was just turned down for a loan modification. Apparently his lender doesn’t think that he has enough income to make adequate payments.
I have read that he would be better off short selling his house than going through a foreclosure.
Who chooses the real estate agent? Does the bank?
~Helping Dad
Dear Helping,
Many people are confused about short sales.
It helps to look at the bank’s approval as a contingency. It’s much like when a buyer makes an offer to purchase a home.
When your son receives an offer on his home there will be a short sale addendum clarifying that the sale is subject to lender’s approval.
Your son gets to choose the listing agent.
A short sale definitely has less impact on a credit report.
In any case I strongly urge your son to seek legal and tax advice. It can be a matter of good Home $$$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors in Auburn.
