What is a Short Sale?

Posted on May 24, 2008
Filed Under Short Sales | 1 Comment

What is a Short Sale? By now most people who own real estate have heard the term “short sale” but they may not understand what it means. A real short definition of the term short sale is the home sells for less than the combined mortgages on the property.

This is accomplished thru negotiations with the lenders. The lenders do not want to have a foreclosure so they are often willing to negotiate a “short sale” – accepting a reduction on their loan balance payoff so the home can be sold on the open real estate market thus saving the lender the extra hassles and financial losses that go along with a foreclosure.

However, there may be tax ramifications to the seller of the property of a short sale. An example could be someone who has taken out equity loans or refinanced for cash out and now the property is worth less than the total amount of loans on the property. This will result in what is known as “forgiven debt” for tax purposes. The question is: Is the forgiven debt of a mortgage taxable? Learn more


One Response to “What is a Short Sale?”

  1. Vancouver, Washington Real Estate » Do I Have To Pay Taxes on a Real Estate Short Sale on May 24th, 2008 4:59 pm

    […] information about taxation on a real estate short sale is informational and not intented as tax advice. You should consult your tax advisor for real […]

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