By Dave Friedman, Realtor and Certified Foreclosure Specialist

You very well may know someone who has gone through a home short sale or foreclosure. There is not a great social stigma with homeowners who have to deal with leaving a home that has more debt than value if there is a drop in family income.

Not only do families get rid of over $100,000 of upside down debt in many cases, they may be eligible in a few years to purchase a new home for a much lower price. The key to positioning oneself to purchasing a home again is how the process is handled.

Homeowners who speak to a Certified Foreclosure Realtor can get to the bottom line of whether a short sale is a good option. The short sale is selling a home through a Realtor with the banks approval versus making the bank spend $50,000 in the foreclosure process.

The key in a short sale is showing more expenses than income as well as not having a large sum of cash in the bank, i.e. tens of thousands of dollars. An attorney should be used to review their situation especially if loan fraud is of concern by the lender.

Do not fall into the trap of paying an attorney to negotiate for lower payments while praying the bank will reduce the total debt owed while keeping the home. I have seen to many home owners spend thousands while wishing a short sale was handled in the first place which costs nothing in most cases.

There are federal and state laws in the homeowners favor. There is no tax and no carry forward debt on the deficiency or the difference on the sale revenue a bank receives compared to the higher total loan debt. This forgiven debt can amount to hundreds of thousands of dollars.

I often educate home owners the fact that this nontaxable gift of debt forgiveness often means the difference of paying the bank back for many years on the upside down debt versus applying the savings for a good use such as your families retirement. Homeowners should always consult with their tax expert.

The reason a short sale is preferred over letting a home go into foreclosure pertains to the ability to purchase another home in a few years. The short sale is bank approved and is viewed in a better light. The time frame to restore much of the fico score is about 3 years for either avenue but the cost of a new loan will be higher with a foreclosure on a credit report.

Your property sale, purchase, investment or distressed loan resolution will be a comfortable and stress free experience from my over 20 years in the real estate business.

You can call me with any Real Estate Questions at 818-Myhouse (694-6873).

818MyHouse.com with Keller Williams Realty – My Experience Turns Your Real Estate Dreams Into Reality.

More Expensive Home Areas Like Porter Ranch go a Break.

President Obama signed into law a bill that will reinstate higher limits for Federal Housing Administration-backed mortgages in high-cost areas. In expensive housing areas such as Porter Ranch, the limit for these FHA-backed loans had dropped to $625,500 from $729,750 on Oct. 1.

The change will enable home buyers to get reasonable loans at rates they can afford. Since over 90% of loans are backed by the U.S government, it is important to see higher loan limits again until the rest of the loan market recovers.