Many people have questions about the Real Estate Short Sale Foreclosure tax consequences. Homeowners want to know—How does a Short Sale affect credit?

Simply put, a Foreclosure is bad for your credit, but a Short Sale is not as bad.

There will be tax consequences for a Foreclosure as well as a Short Sale. However, a Short Sale allows homeowners to exercise more control over the situation. In a Foreclosure, the lender controls all aspects of the transaction.

Short Sale correspondents, or loss mitigators, are the people that help you navigate the minefield of Short Sales. Each homeowner can expect different tax consequences, so contact your individual tax adviser for details.

Many investors want to buy Foreclosures because they can often be purchased at bargain prices. However, Real Estate trends indicate that today's market is heavily in favor of Short Sales. Banks are overloaded with Foreclosures which are expensive and create substantial liability for them. Short Sales cost the lender virtually nothing and allow them to avoid liability issues.

If you are a homeowner with an over-mortgaged property, a Short Sale is probably the answer. Short Sales are often more beneficial to sellers than Foreclosure or even loan modification. If you are a buyer trying to take advantage of the current Real Estate market, a Short Sale is a good solution. Short Sales can be beneficial to buyers because the banks are often more cooperative than in Foreclosure situations.

During the next 2-5 years, we expect Foreclosures to be downgraded in importance as the Short Sale becomes king.