Why shouldn’t I short sale my property? Disadvantages
Deficiency Judgements –
A lender could file for a deficiency judgment to demand you pay the difference between the short sale amount and the entire mortgage balance you owe on the property.
Taxable Income –
You could be taxed on the amount forgiven. The IRS views forgiven debt as taxable income. Only your primary residence is excluded from this tax . See the Mortgage Debt Relief Act of 2007.
Credit Score Damage –
Lenders will report short sales “not paid as agreed” to credit bureaus. This will lower your credit score considerably.
Slow Process –
Short sales requires the lenders approval and can take anywhere from a few weeks to months before even hearing back.