Homeowners / Seller's Rights
Short Sale Seller's Rights
You have more control than you may realize. Here is what you are entitled to as a short sale seller.
Navigating a short sale can feel overwhelming, but knowing your rights puts you in a much stronger position. ShortSaleMyHome is committed to making sure these rights are honored at every step of the process.
Right to Choose Your Representation
As a seller, you have significant control over how your home is sold. You choose who represents you in the negotiation — the bank or lender does not make that decision for you. You may also choose to forgo representation, though that is not advisable given the complexity of short sale negotiations. You also retain the right to show the property to anyone you choose, and you are not compelled to show it to anyone at the lender's request.
Right to Approve or Reject the Selling Price
Pursuing a short sale is your decision — you are not obligated to proceed. While lenders play a key role in approving the final sale, the Home Affordable Foreclosure Alternatives (HAFA) program of 2010 requires lenders to specify the price at which they are willing to authorize a short sale. You have 14 days under HAFA rules to decide whether to accept those terms. Even if an offer matches the lender's pricing conditions, you retain the power to reject it.
Federal Tax Protections
The IRS requires taxpayers to report forgiven debt on Form 1099-C, as it can be treated as taxable income. However, the Mortgage Debt Relief Act of 2007 exempts homeowners from paying tax on forgiven debt if the home is a qualifying primary residence sold to prevent foreclosure. If the short sale occurs during a bankruptcy, forgiven debts are also not taxable income. Even when debt is not recorded as income, it must be reported on IRS Form 982.
State Tax Protections (California)
In California, short sale sellers may not be required to pay taxes on the transaction. When a taxpayer has a loss or no gain from a short sale, they have the right to avoid tax withholding. No tax is due if the entire transaction price is less than $100,000, if the buyer is purchasing the property as part of a foreclosure, or if the sale involves a bank acting as trustee. Any money generated from a short sale may be subject to taxation, though several exceptions apply.
We'll Make Sure Your Rights Are Protected
Call us at 408.740.7400 or schedule a free 15-minute Zoom call to get started.
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