Individuals confuse the property’s tax impacts with the property’s economics. However, these two calculations are different. For tax purposes gain or loss equals the difference between the transfer price to the bank and the adjusted basis.

Thus, if you bought a property in 1987 for 700k (your cost basis) and it has been depreciated and now has an adjusted basis of $400K, and it is foreclosed with a 950k loan, this transfer without a 1031 exchange results in a taxable gain of $550K, i.e. $950k transfer price minus the $400K adjusted basis. ES Group is a Qualified Intermediary pursuant to Internal Revenue Code

Avoid Foreclosure Hell & Get Your Life Back!

Today, you do have options when it comes to foreclosure. You can negotiate with the lending company and try to keep your home or you can consider a short sale. Some people will tell you that a short sale will save your credit while others say that a short sale or a foreclosure will ruin your credit. If you look at what a short sale does, I do not see how it can ruin your credit. A short sale is an agreement between yourself and the lending company to take less that the amount owed to settle your loan. Of course, if you are behind in your mortgage payment, this will be on your credit report; however, this does not necessarily have to be considered a negative factor. It will only show that you were late on your mortgage, but once the loan is settled the lending company will have to report the loan paid. One negative late payment does not look as bad as a foreclosure.

A late payment of course looks bad on your credit report but if you have positive factors as well, the negative will not look as bad. One late payment will certainly not lower your rating to put you in the group of bad credit rating individuals.

With the list of pros and cons below, you should be able to make an educated decision on whether you wish to go a short sale route or a foreclosure route.

Pros of Short Sales

* Preserve your self-respect that you sold your home* You will not suffer the embarrassment of foreclosure* No more mortgage payments* Under Fannie Mae guidelines you can purchase a new home in 2 years* If your credit report does not shoe a 60 day + late pay, you can purchase a home immediately under Fannie Mae guidelines

Cons of Short Sales

* Waiting to hear from the lending company if they accept or deny your short sale can be annoying.* The lending company will need to see all your personal records including assets, liabilities, bank accounts, and tax returns to name a few to learn if you have a financial hardship.* Buyers will need to see you home, so you have to keep your home ready for potential buyers until an offer is received* The bank does not have to accept a short sale offer

Pros for Foreclosure

* No more mortgage payments* The foreclosure process takes a long time, meaning the home is yours until the foreclosure is complete.* You do not have to keep your home available for potential buyers

Cons to Foreclosure

* The lending company can post a Notice of Public Sale on the home* A foreclosure will remain on your credit report for 10 years.* You will not be able to purchase a home under Fannie Mae guidelines for 5 years.

Foreclosure Profits Now.

Avoid Foreclosure Hell & Get Your Life Back!

Stop Your Foreclosure Sale Today.

Tips To Prevent Foreclosure- How To Save Your Home From Foreclosure.

E-kit: How To Overcome Foreclosure And Come Out A Winner.

The BPO is nice because it not only shows the last three sales, but also similar properties that are active on the market for sale. For example, just because the last three homes sold for 200K, and the appraisal supports a price of 200K, doesn’t mean the bank will get 200K on this house. The house is only worth what a buyer will pay. And how much will a buyer pay? As little as possible, especially in a declining market, so the banks really do need to look at what else is available for sale that’s comparable. If a similar house is available for sale for 150K, then no one cares what the appraiser says, the bank will not get 200K if there are no buyers for that house at 200K regardless of what the appraisal says. The down side of these BPOs is that any realtor can do them, and realtors are not trained appraisers. Some realtors that do these BPOs are highly qualified and trained individuals, but many are just non-producing realtors looking for a way to make a little extra money. How much of a grip can a non-producing realtor really have on what things are selling for and what buyers are willing to pay for real estate? The appraisal carries a little more weight, but only looks at the last three sales and does not go into much detail about asking prices for active listings, so quite often the appraisal supports one purchase price, while the actual market value is lower.

With a value in hand, the banks will compare this to the short sale offer and decide how to proceed. They do not have a set rule, and it really depends on the end investor, so I can only comment on what I have seen so far. For example, a Loan Servicing company wants 75% of the appraised value (not the loan amount) in order to approve the sale. One bank wants 90% and although I have seen them go as low as 85%, I have never seen them go lower. Another bank B or bank C will accept 75% of the BPO, as long as the end investor is bank D. So as you see it varies and every situation is different. A few words about Short Sales (If you want to liquidate the property) A short sale is the best option if you have to liquidate the property and you cannot get what you owe. Short sales are better than the deed in lieu and much better than foreclosure.

How To Prevent Foreclosure Guide.