Foreclosure VS Short Sale

This is general information & concepts. I suggest talking with an attorney or tax professional....

Short sales can be very complex...  Often borrowers tell the Bank to “just foreclose” either as an act of desparation or as a negotiation tactic, but in reality, Short sale agreement is a much better way to go, and come careful planning & consulting by Realtors, Attorneys, and Tax professionals can get you into a much better position in the long run. 

There will come a point where it will be well worth accepting a Short Sale on the 1st mortgage and a settlement or small payoff plan on the 2^nd mortgage…. Here is why…

Short Sale

First Mortgage often forgives substantial amount in writing , IRS tax free per current short sale laws.

Offers from 2^nd mortgage are often in the form of cash settlement or as a payment plan option in writing, and IRS tax free as well.

Foreclosure

2^nd mortgage rights to the property are “wiped away”, but they usually retain rights to a deficiency judgment.

1^st mortgage, especially in down markets have filing for a motion for deficiency after the foreclosure sale, this often results in a certified court judgment for the deficiency, in many cases this can be hundreds of thousands of dollars (not cool)

 In reality, Short sale agreement is a much better way to go. Massive settlement on the first mortgage gets done, and you can continue to work in the 2nd mortgage, or often even the 2nd mortgage is settled at closing.

Again, these are general concepts & information. Every lender can be different, Every investor can be different, and I reccommend contacting qualified professionals to assist you with your real estate Short Sale.