FORECLOSURE : 1. Sale can do irreparable damage to the homeowner’s credit. 2. Will prevent the homeowner from obtaining another home loan for
some time. 3. Stays on the credit report for 7-10 years. 4. May interfere with renting if they do not have sufficient collateral. 5. Will face a deficiency judgment if the foreclosed upon deed of trust
was not a “purchase money”. This judgment is calculated on the amount the homeowner owed the lender and what the lender actually received towards the pay off.
6. May also face a tax liability – if the lender chooses not to record the deficiency judgment they have the option to write off the loan and issue a 1099 which the homeowner will pay taxes on.
Debt Relief: Homeowner should talk to their tax professional regarding adjusted cost basis for home improvements, repairs, etc.
SHORT SALE: 1. Will avoid a foreclosure on the homeowner’s report. 2. May reflect on their credit report for up to 2 years . 3. Deficiency judgment may be avoided and tax liability may either be
avoided or minimized. 4. Allows the homeowner a better credit score, but remember their credit
by this time may already be affected. Credit report will show: settled paid, short sale, offer & compromised – All less damaging than “foreclosure”.
5. Allows the homeowner more time to find a new place to live on their terms instead of facing eviction.
TheJNLGroup Real Estate provides this information as a guide. The information provided should not be used as a substitute to talking to a professional tax advisor or real estate attorney about your individual situation.