If you are a homeowner in distress, foreclosure should be the last option you consider. If you have closed a successful short sale you should receive a 1099 in the mail. Everyone who has sold short their home receives a 1099 for the difference of what they owed on their mortgage and what it sold for. However, if you lived in your home for 2 out of 5 years you may qualify for The Mortgage Forgiveness Debt Relief Act. This will allow for that debt to not be held against you for when you file your taxes.
The Mortgage Forgiveness Debt Relief Act is currently in place through 2012, meaning your Gainesville short sale must close prior to the end of 2012. Visit www.irs.gov or speak to your CPA to find out additional information. The act will allow for the debt to be forgiven and secondly, the bank will also forgive you for that loss and will not seek a deficiency. Florida is a deficiency state which means they can come after you for the loss you still owe them.
In 90% of our Gainesville short sales we have been able to negotiate the waiver of deficiency. This is not a guarantee and it is based on each seller’s own unique circumstances. If you qualify for HAFA, the program will give a release of deficiency as part of the program guidelines. It is easier to have a deficiency waiver if you financially insolvent or if you are unemployed. If you have money, many times the waiver of deficiency is subject to a cash settlement. You may be offered 2 different cash settlements. One will be for a lower amount, for example $5,000 cash to close, while the other may be $10,000 at 0% interest with payments of $55 over the course of 15 years.
These are much better reasons than to do a foreclosure in Gainesville. Take into consideration this scenario:
Let’s say you owe $250,000 on your Gainesville home, you bought it for $278,000 and it is now worth $150,000. A $100,000 difference in what you owe the short sale bank and what the home is worth. A buyer contracts on your home for $150,000 and the short sale bank agrees to the short sale, agrees to waive the deficiency but comes to you and asks for you to come to closing with $5000 or take a unsecured note for $10,000 at 0% interest payable over 15 years at $56 a month.
You say no and the home ends up in foreclosure, is resold after being carried by the bank for a year from the foreclosure date to resale. In the interim the Gainesville home deteriorates slightly from nobody living in it and causes the value to go down by 15% and the sales price is $127,500. The short sale bank incurred taxes of $2800, attorney’s fees of $12,000, Realtor commissions of $7,600, carrying costs of $3300 for utilities for the year and $3500 in miscellaneous expenses. The $100,000 difference in the short sale price to what was owed is now $151,700 that the bank may seek a judgment against you for that amount. This is a big difference between possible out of pocket costs and not to mention how your credit will be affected. Keep in mind if you foreclose and a judgment is sought, your wages may be garnished. Certain criteria must apply for this to happen. Please seek legal advice from an attorney.
Credit should be another consideration. With a Gainesville FL foreclosure it is listed on your credit report as such and you will have to wait 5 to 7 years to purchase another home. With a short sale, the bank will report paid in full as agreed or paid less than agreed and you will have the ability to purchase again with FHA in 2 years after the short sale.
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Call Stephanie Anson today at 352-535-0620 for a confidential phone interview regarding your options.
Please seek legal advice. This information is for informational purposes only.
Contact Stephanie Anson, CLHMS, CDPE, SFR, Realtor®, Anson Properties LLC. Licensed Realtors® in Florida at 352-535-0620 to list your property for sale or to purchase a property in Gainesville, Archer, Alachua, High Springs, Waldo, Keystone Heights, Hawthorne, Melrose, Cross Creek, LaCrosse, Williston, Earlton, Ocala, Micanopy, Newberry, Kanapaha, Haile Plantation, Duck Pond and the rest of Alachua County Florida, Orange County Florida and Seminole County Florida. We are accepting referrals. Gainesville Short Sale Agents