So we have had a lot of inquiries recently regarding short sales, the costs, the tax consequences, etc. so we wanted to write a simple and quick tutorial for those who are considering it or even for those who already in contract on one.
In a traditional California sale, the seller (Mr. and Mrs. Smith) will be responsible for paying some closing costs, fees, commissions, etc. at the close of escrow. However, in a short sale transaction, the seller is actually a Bank/Investor like Bank of America, and they are the one's responsible for paying closing costs, fees, commissions, etc. In that scenario, Mr. and Mrs. Smith pay nothing, but lose their dream home and damage their credit. Bank of America takes a massive financial loss, but they send Mr. and Mrs. Smith a 1099 for that loss. The Smith's then become responsible for claiming the banks loss as income on their next years' tax returns. See your CPA for details as I am not a real CPA, I only play one on TV :-)
So bottom line, you will pay almost nothing to short sell your home, however there are some consequences to consider, like moving your family, the costs associated with moving, rent payments and of course, damaged credit. However, if you are a struggling home owner, who has a true financial hardship (job loss, death in family, job transfer, etc.) then you might be eligible for a short sale and it is an excellent start to getting back on your feet again!
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