New Jersey is still leading the nation in short sales of Real Estate. This means that a seller is able to sell the home for an amount less that what is still owed to the Lender.
The Lender must provide their approval to do so obviously, because the Lender looses money from their original investment.
Many Sellers need and prefer the short sale option to foreclosure, because it is less damaging to their credit. However, a short sale must be carefully examined by the Seller and the Sellers Attorney to determine the income tax ramifications of the transaction upon the Seller. A forgiveness of debt can be considered as income to the Seller.
In such case, the Seller sells the house, (walks away with no money and no mortgage left on the property) , but then the Seller receives a notification in the mail six months later requiring the Seller to pay a large income tax payment based upon the forgiveness of debt. It is for this reason that a seller in a short sell transaction should retain a knowledgeable Real Estate Attorney to assist them through the process.