Why not just give the keys back to the bank? A foreclosure will do more damage to your credit. Additionally if you are a financial planner, work for a company that has government contracts, hold a security clearance...you may lose your job. A foreclosure can create a larger tax liability due to the bank having to sell the property at auction for a lower price; thus creating a greater write-off; and you may receive an IRS 1099 form and be liable for paying taxes on this deficiency as though it were income. This can amount to $20,000 in additional taxes if your the bank has to sell the property for $100,000 less than the value of your loan (which often happens).Under a foreclosure the lender can pursue a lawsuit to recover the deficiency between the sales price of the home sold at auction and the amount owed on the property. Many second loans are not protected under any anti-deficiency laws and the borrower will be liable for these loans as well.
Based on these risks I believe that you should always look at all of your options (including a short sale) before deciding to "walk away" from your home. Many have done this and are now in court fighting with the banks because they were under the assumption that they were free from all liability.
A qualified short sale specialist can and often will negotiate with the bank on your behalf to ensure that you are fully released from ALL future financial liability. Click here to get back to the home page.
