Short Payoff - Tax consequences can be exceedingly important in short payoff situations.

In some instances, particularly where real property values have declined, a property´s value at the time of sale

can be less than the current balance of the underlying mortgage. "Short payoff" is a term used to describe a

real property sale and purchase transaction in which the lender agrees to accept a payoff which is less than the

amount of the borrower´s debt. Such payoffs typically are arranged in cases where a borrower has defaulted

on the loan secured by the property.

Tax consequences can be exceedingly important in short payoff situations. It is recommended that sellers

seek the advice of an appropriate professional, i.e., a certified public accountant or qualified real estate

attorney, before attempting to arrange a short payoff. Also, in any short payoff situation the seller should

negotiate with the lender regarding how the payoff will be reported to credit reporting agencies. Prior to

agreeing to a short payoff, the lender may require the seller to furnish a variety of documents, including a

copy of the real estate sale and purchase contract covering the sale of the property and proof of the buyer´s

ability to purchase the property.