The phrase “short sale” is definitely a buzz word in today’s real estate market. It seems like everywhere you turn, someone is either talking about buying a short sale, or looking to do one for their home. If you have questions about doing a short sale, read below to find out some more information about the process.
A short sale takes place when the sale price of the home is less than what the seller owes. Why would the bank take less than what is owed? Because it is cheaper for the bank to do the short sale than go through the foreclosure process. A buyer will put in an offer on a home and the seller may accept the offer, but the lender(s) of the seller has the final say. ALL short sales are subject to bank approval. Short sales can take anywhere from 30 days to as long as 6 months to get bank approval. Of course, this depends on the bank involved (some take longer than others), the number of loans on the property, the real estate agent’s knowledge of short sales (which can either hinder or help the process) and various other factors.
While every short sale is unique, click here to see what you can expect from my approach and handling of the short sale process.
A few questions to consider:
No you do not have to pay any real estate commissions out of pocket. The realtor commission are paid by the lender.
A hardship letter must identify the reason(s) you are unable to continue making your mortgage payments and why you want a short sale. Click here for a sample hardship letter.
A deficiency is the difference between the new proceeds from the sale of your home and the amount you owe on the mortgage. For instance, if you owe $250,000 on your home and you sell it for $200,000, the deficiency is $50,000.
After both a foreclosure and a short sale, the lender may begin proceedings in court to recover the deficiency that resulted from the transaction. After a foreclosure, there is no chance to negotiate with lenders regarding the deficiency amount and the chance of the lender pursuing the entire deficiency is high. However, by going through a short sale rather than just walking away from the property, the borrower has the opportunity to negotiate the final outcome with regard to the deficiency, which is where an experienced agent comes in handy.
The deficiencies associated with a short sale or foreclosure are treated as debt forgiveness by lenders and the IRS. Debt forgiveness may be treated as additional income unless the borrowers are exempt under the Mortgage Forgiveness Debt Relief Act of 2007. This exemption applies to most homeowners. However, if you have any question as to whether or not there will be tax implications in your situation, you should always consult a real estate attorney or accountant.