Seller Considerations.
A seller has many different options other than a Short Sale in case the seller finds itself in a hardship or in a default situation. This seminar just evaluates a Short Sale. Short Sales are not necessarily good for all sellers from a tax or financial perspective, so you have to urge the seller to get professional tax advice or financial advice regarding its particular situation. The seller's credit will be affected by a Short Sale, but not nearly as much as it would be by a foreclosure or a deed in lieu of foreclosure.
The seller may also be liable for income taxes on any deficiency that the seller's lender forgives after the short sale has occurred. The seller's lender may not forgive any of the debt deficiency, and the seller then will be liable for said deficiency amount after closing.
The lender, in its sole discretion, determines whether or not it will pursue a deficiency judgment. Congress has passed, and the President has signed, into law limitations on, and, in some cases, elimination of, income taxes owed on forgiven deficiencies. I strongly urge Realtors not to give any tax or financial advice. The seller must understand that it requires a lot of work to obtain a Short Sale approval, and the seller must be willing to devote the necessary time and effort. If your seller is not willing to do a lot of work, then it is not worth your time.
