"Short Sale" vs Rent. Credit Impact and Being a "landlord"- by Tampa Property Manager

Maybe its a new job in another city that is making you vacate the home you own in the Tampa Bay area? Whatever the reason for moving out of your home, you are likely faced with the decision to either "short sale" your home or rent it. The reason being that your property is worth a much lower amount than what you owe on your mortgage. Thus, you don't have the option of doing a regular sale.

Based on our professional expertise and experience with property owners in Tampa, here are the pros and cons of both a short sale and deciding to rent.

Short Sale - Pros and Cons

Pros:
You no longer own the property
Less damage to your credit report than a foreclosure

Cons:
In order to do a short sale, your lender must first approve it. Due to what's called a "moral hazard," lenders may only allow a short sale for people who are experiencing hardships. If you have a lot of income or assets, they may not approve it.
Once your short sale is approved, it will lower your credit score making it difficult to receive a mortgage for several years.
With a short sale you may experience a deficiency judgment, meaning a lender may go after you for the amount of the debt they've forgiven. Most lenders do forgive the debt owed when you do a short sale; however, there are a few that reserve the right to go after you at some point in the future to get that money back.
When debt is forgiven, the IRS views that as income and could require income taxes on it. Therefore, there can be tax consequences for going through a "short sale".

Renting Pros and Cons

Pros:

Does not affect your credit
You are not likely to go through a deficiency judgment
Since the real estate market in the Tampa area has bottomed, home prices are now starting to see some appreciation. By keeping your property, you will be able to participate in the price appreciation.
If you ever plan to return to the Tampa area, your home will still be available for you to move back into.
Cons:

You may not have ever intended to be a "property manager"/landlord and know nothing about the renting process.
May experience bad tenants and/or incur damages to the home during tenancy.
Since your mortgage payments are much higher than the current value of your property, the rent may not cover your monthly expenses. As a result, you will have to budget for that deficit.
Both the short sale and renting options can have a negative effect on your investment and cash flow, but either way they're better than going through a foreclosure on your home. Here at Hoffman Realty, Tampa Property Management, we look at credit reports every day. We see credit reports from people who've gone through short sales to people who've gone through foreclosures. From our experience, we've seen that short sales will do a lot less damage in regards to your credit report.

Luckily if you choose to rent, any renting issues can be mitigated with the help of a good professional "property manager" here in Tampa. If you are considering a short sale, however, it's highly recommended you seek out qualified legal advice.

Take the time to weigh your options in order to choose which choice is a best fit for you.

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