That tends to happen with housing, meaning people cant move but prices do not appear to fall.
(In the US you don't end up with a debt to the bank if the value is less than the loan, but thats not the case in the rest of the world)
(In the US you don't end up with a debt to the bank if the value is less than the loan, but thats not the case in the rest of the world)
This varies between different US states (real property law is generally not federal law) and, IIRC, between first and second mortgages in some of those jurisdictions.
Could you explain this a bit more. I think you are saying that in the US when you sell your house for less than the value of the loan, the banks takes the loss instead of you, which is not how I thought it worked. Does this have something to do with mortgage insurance?
Credit and taxes -- a short sale is, though damaging, less so to ones creditworthiness than a foreclosure, further, the entire amount of the unpaid principal (in either the short-sale or the foreclosure/surrender case, but foreclosure sales generally return less than a short sale with positive owner involvement would) is taxable as income.
This is generally the case with a voluntary sale at less than the loan value, but those are generally only possible with the consent of the lender (who has a claim on the property which must be extinguished for you to sell it.)
It is also sometimes the case in the event that the lender forecloses on the property for non-payment, and the foreclosure sale produces less than the amount owed on the loan -- but this differs between different states.
That's only in certain states. Most states are "recourse states" where the bank can sue you for the difference between whatever they sold the property for and the remainder of the loan.