Understanding Short Sales in San Diego

In our economy here in San Diego and nationwide, your credit report is everything, and finding ways to save your credit and avoid declaring bankruptcy are essential to being able to move on with your life after a home ownership deal takes a turn for the worse. There are several opportunities to escape disaster, depending on your situation, each with pros and cons that can influence one person’s decision-making process. Whichever option you choose, you should carefully consider all of the pros and cons before making a move that can potentially change the course of your life, especially in the short-term, financially speaking.

The Short Sale Option

In the city of San Diego, like most of the rest of the major cities in the United States today, the short sale option has become extremely popular to help homeowners out of a very sticky situation. Put simply, it is an opportunity to sell your home for less than what you owe, often resulting in the lender dismissing the rest of the debt. Your credit report will reflect that the debt was settled, and the lender cannot come after you later for the difference in the selling price and what you actually owed.

Pros: You do not have to pay taxes on the sale difference amount in most cases, based on 2007’s Mortgage Forgiveness Debt Relief Act. In addition to this perk, the debt settlement agreement with the lender only stays on your credit report for a few years, instead of at least seven with a bankruptcy. Most experts claim that it is far easier to be accepted for a short sale option than to be rejected, unlike some of the other options.

Declaring Bankruptcy

Many people see declaring bankruptcy as one of the only acceptable alternatives to short sales, even in San Diego and similar areas. However, there are more cons than pros to this option, including the damage that it does to your credit report. This damage is long-term, often lasting 7-10 years and meaning that it could be very difficult to find a great home or get a substantial loan for any other reason in the meantime.

Pros: Declaring bankruptcy is a fairly fast option, often taking 30-90 days to complete the process and begin to move on with life. A great San Diego bankruptcy lawyer could negotiate the terms so that you only have to appear in court in person once, to discuss the motivations and reasoning behind why you should be allowed to file. If you are approved, you will not have to repay the loan amount and the debt is forgiven, although it does stay on your credit report for a long time.

Comparing These Options

Sometimes the best way to get the answer to a question is to compare all of the options together to determine which one fits your situation best. After all, short sales are just one of several other viable options, such as bankruptcy and attempting to sell your home using more conventional methods. Weigh the pros, and learn the cons, about each option, especially considering recent information about the San Diego real estate market. Understand what you are getting into—learning until you are comfortable with all of the knowledge that you have received—before you sign on the dotted line.