More than 50 percent of homeowners in the California area are going through the short sale process, and many wonder if we’ll see an increase of short sales in 2012. Homeowners are opting for short sales in lieu of foreclosure because of less credit damage and for some, a monetary relocation incentive is provided. But many homeowners aren’t aware that there are actually two different short sale options! When you are discussing the choice to short sale your real estate property with your lender, bank, or creditor it is crucial to find out which type you’re signing up for before you proceed.

Deficiency Judgment. The first short sale option is called a deficiency judgment and it is unfortunately the most common. In this option, the homeowner is responsible for paying the difference between the short sale and the balance of their mortgage loan. Much to the dismay of homeowners, the act of the short sale isn’t the only item that affects your credit. The balance of a deficiency judgment will also stay on your credit report until the balance is paid off, and because that amount ranges in the thousands it can remain on your credit report for years!

Payment in Full (Without Pursuit of Deficiency Judgment). Obviously an option that doesn’t require paying back thousands of dollars on a home you weren’t able to keep is the most popular choice for homeowners. Once the home is sold, the homeowner has no obligation to pay the difference between the balance between what is owed and what is made. However, homeowners fortunate enough to receive a Payment in full Without Pursuit of Deficiency Judgment aren’t out of the woods yet. Homeowners should verify with their lender that the forgiven debt will not be taxed and counted as income by the IRS.

Homeowners considering a short sale should remember to immediately ask their lenders if they will be held liable for paying the difference between what is owed and the final sales price before they begin the short sale process.

For a list of short sale homes in the San Diego area visit

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