Many Bradenton - Sarasota, Florida homeowners are facing the risk of foreclosure in our declining market. For some, a short sale may be the solution. In a short sale the lender agrees to accept less than the current mortgage balance rather than take the property back through foreclosure.

In most cases the lender will issue a 1099 to the borrower for the forgiven debt. The borrower may owe taxes on this amount. There is current legislation that would eliminate the tax on mortgage relief. I advise you to consult with your tax professional about the status of this issue.

How Does a Short Sale Affect Your Credit?

The credit score of the seller will take a bigger hit by going through foreclosure or giving a deed-in-lieu of foreclosure than with a short sale. The consensus is that a short sale may result in a loss of about 100 points on the borrowers FICO score. A foreclosure or deed-in-lieu of foreclosure may result in a lost of 250 points of more.

Also to be considered is how long a borrower must wait before they buy another home. A foreclosure may force the borrower to wait as many as 36 months before they can comfortably buy again. However, with a short sale, the borrower can buy again in about 18 months.

Most people, when faced with the possibility of foreclosure, find a short sale to be a better solution. In my previous posts I covered all of the options that a Bradenton, Florida homeowner needs to consider. I always recommend that the homeowner discuss their situation with their attorney and their accountant.

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