Question: I relocated to AZ and still have a house in Nevada. I can no longer make both house payments and am considering letting my house in NV foreclosing or short sale. Not sure what tax liabilities or other repercussions may he entailed.
There are many possible repercussions when a property forecloses. Having a foreclosure on your record will negatively affect your credit score causing your score to lower. A low credit score can cause many difficulties in various aspects in a person’s life. For example it can affect a person’s ability to obtain a credit card, car, or a loan.
A short sale is similar to a foreclosure but does not have as strong of an effect on the credit score. Typically a short sale will show up on your credit report as “settled for less than full balance.” This still has a negative impact on your score but less than if it were shown as a foreclosure. If possible, ask a lender if they are willing to show the loan as “paid with no late payments,” which will further help lessen the affect on your credit score.
Whenever possible it is always best to try and work with your lender not to foreclose. Foreclosures hurt everyone involved; so most lenders will be more than willing to help you find other alternatives.
March 13, 2008