Riverside County Short Sales

If you cannot afford the payments on your home and restructuring the loan will not help, a short sale is one way that you may be able to avoid foreclosure and the blemish it brings to your credit report. However, in order to take advantage of a short sale, your bank must agree to the transaction. In many instances, you must already have a buyer for the home, and you may not know what price the bank will accept until you have found a buyer and are ready to negotiate the deal.

The lender benefits from the short sale by avoiding having another foreclosure on the portfolio, while the obvious benefit of a short sale is that you are able to avoid a foreclosure on your credit record. However, you must be cautious when making this kind of arrangement. A Riverside short sale can leave you liable for debt forgiveness tax on the amount of the mortgage that is forgiven by the sale of the home.

For example, if you owe $100,000 on a house, and are only able to sell the house for $80,000, which the bank accepts as a short sale, you might be liable for debt forgiveness tax on the remaining $20,000 you originally owed the bank. This is because the tax authority counts the forgiven debt as income for tax purposes. One of the ways to avoid the debt forgiveness tax Is to file a Riverside bankruptcy in conjunction with the tax, in order to have it eliminated – however, there are also special laws in place for recent homebuyers that may minimize or eliminate the debt forgiveness tax as well.

Short sales can be tricky and there are no guarantees of success. If you are considering a short sale, or have accomplished a short sale to prevent foreclosure and need more information on preventing the debt forgiveness tax, please contact our Riverside County Bankruptcy Law Firm right way. We will work with you to develop a plan that fits your unique circumstances and that will give you the peace of mind you need in order to make a fresh financial start.