My house is in default, foreclosure or short sale? do I still pay taxes on any of them?
Question:
Answer:
A short sale is generally your best bet if you can make it happen. In your case it may be to late to sell it. Weather or not you pay taxes is up to how your agent negotiated the deal with the bank. you may get away oweing nothing.
A short sale would probably be the best option to unload the house, get the loan paid off as much as possible, and just make a clean break. However, the difference between the lower payoff and the total amount that you owe on the loan will be considered income to you. So you'll have to pay taxes on that difference.
If you just let it go into foreclosure, there won't be any tax issues, unless the house sells at sheriff sale for more that what you owe on the property. Then the proceeds from the sale would be returned to you as your gain on the sale of the house. You may have to pay taxes on that amount, unless you use it to purchase a new home. This might be difficult to do with a foreclosure on your credit.
Also, the short sale would look better on your credit report, since the loan will be showing as paid off. The foreclosure will look much worse, as it shows that you took out a large loan and could not meet the obligation to pay it back.
With the short sale, you might have to pay some taxes now, but your credit may improve a little quicker. That would save you more money in the long-term if you use credit again, as you could qualify for lower interest rates more easily. With a foreclosure, you probably wouldn't pay extra taxes now, but you would pay extra interest on any credit you receive for the next few years. It's kind of a trade-off for you, and one that you should probably take some time to consider.
Good luck.
ForeclosureFish
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