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The lawyers of BK Lawyers LLC practice law from their office in Seattle, Washington. The firm handles legal matters in the following practice areas:

Bankruptcy, Shortsale, & Loan Mods, Immigration and Citizenship Law, Estate Planning, Business Start-Ups, Personal Injury &a…

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Bankruptcy Blog Post

Is A Short Sale Right For Me?

Washington ranks among the top ten states with the highest foreclosure rates in the nation. If you are a real estate owner facing mounting debt and the threat of foreclosure, you might consider a real estate transaction known as a “short sale” to help reduce this debt. However, a short sale is not a panacea ― and not appropriate for everyone. Short sales are complicated real estate transactions that entail legal and financial risk.

A short sale is sometimes proposed when the property’s intended sale price is not sufficient to pay the outstanding mortgage debt and other obligations on the property in addition to the sale costs, and the seller is unable to pay the difference. A short sale requires the mortgage lender's approval and agreement to release its security interest in the property for less than the outstanding debt owed on the property. Even if the lender approves the short sale, it does not necessarily mean the borrower is absolved of his or her responsibility to repay the debt. The lender may still pay pursue the outstanding debt, along with interest and penalties (the “deficiency”).

Short sale pros and cons

Short sales can offer several benefits to overburdened borrowers. For one thing, short sales can benefits overburdened borrowers by possibly  preventing a lender from suing on a deficiency judgment for an unpaid debt — participation in a federal foreclosure prevention program blocks the lender from pursuing such a judgment or thorough an individual written agreement with the lender.

In addition to these benefits, when contemplating a short sale of a property, it is important to consider the following potential downsides:

  • A short sale may not fully discharge the debt as the debtor may still be able to file a deficiency judgment
  • Potentially higher tax debt since debt forgiven in a short sale is considered a form of debt relief which may be considered as income for tax purposes.
  • Potential waiting period before you may purchase a new home

If you are facing foreclosure, the bankruptcy attorneys at BK Lawyers LLC are available to help you determine whether the short sale of your home is the right option for you. Contact us to schedule your free initial consultation.

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BK Lawyers LLC
101 Warren Avenue North, Suite A
Seattle, Washington, 98109 USA