At today’s realtor tour meeting our speaker, a former owner of the Money Store, offered some information about the impact short sales are having on seller’s credit scores. According to his statistics a short sale affects credit by reducing a seller’s FICO score on average 80-100 points. In contrast a foreclosure or bankruptcy impacts the score between 250-280 negatively. It’s obvious from this information why a homeowner should pursue a short sale but I would caution that getting your home on the market at the first sign of distress is a must for a successful short sale.

Another bit of important information is the impact a short sale will have in terms of taxes. The Mortgage Debt Forgiveness Act of 2007  states that non-recourse money (original purchase money) is a non-taxable event for sellers of homes sold from Jan 2007 until Dec 2012. California has not to my knowledge extended this beyond 2009. This is not so with recourse money IE: equity lines or refinances. However,  if you took out a loan to put in a pool or landscape and you find yourself in a situation where you have to short sell you might be able to avoid paying taxes on the borrowed money IF you can produce receipts. Of course talking with a CPA is always one of the first things I recommend to my clients.

Talking with a knowledgeable Realtor is your first line of defence and can offer you a dignified exit during a stressful time in your life. If you would like more information or need to speak with me please call and let me explain your options before things snowball and get out of control.

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