The first question an upside down homeowner must ask themselves is why do a short sale.
Do I wish to help the lender?
Do I wish to help the buyer?
Do I wish to make money for the Realtors?
What am I doing for myself?
Am I really saving my credit?
Maybe, for now it looks like a short sale is better for your credit score, but that could change.
Am I risking tax for loan forgiveness by doing a short sale?
If you are a california homeowner you may be hitting yourself with a very large tax bill for loan forgivness. If the bank writes off $100,000 you could get hit with a tax bill as if you received $100,000 in income. That might even jump your tax bracket.
I have heard many realtors and loan brokers say there is no way around it.
Wrong, a foreclosure or deed in lieu does not cause loan forgiveness for some california home owners where a short sale does. (there are other ways to eliminate or minimize the tax bill)
In our next post will show how some short sales have credited deficiencies for home owner where none existed before.