Considering a short sale?
What is a short-sale? A short sale occurs when a lender agrees to accept less than the full mortgage amount from the borrower. i.e. The bank is owed $200,000 on the remaining balance of the mortgage, but the market value of the home is now only $190,000. A buyer for the property is produced that is willing to pay $185,000, so we will negotiate with the bank to allow the purchase of the home for $185,000.
The bank avoids the costly foreclosure process, the seller is able to get rid of the un-manageable mortgage, and the buyer is happy to have his new home at a slight discount.
Can anyone get a short sale on their property? Although it is much easier in todays economy to get a lender to agree to a short sale, not everyone is a candidate for a short sale. Banks will not just take a loss because of a poor decision in a home purchase. There must be a life altering event that occured such as:
- Divorce
- Accident
- Loss of job
- Illness
- Death
Can I receive cash from a short sale? NO, the short sale is designed only to get you out of your mortgage more quickly than going through the entire foreclosure process. It is not a refinance option, you are leaving the property the same as if you were going to foreclosure.
Do I have to use a Realtor to do my short sale? No, you can use an attorney, a title company, or a third party company specializing in short sales, but you must use a competent professional that understands the short sale process and can negotiate with the banks on your behalf.
Is there a benefit to using a Realtor? Using the RIGHT Realtor-YES! Honestly most Realtors have no clue about the short sale process. They tend to believe that they can just list a house as a short sale, find a buyer, and then negotiate with the bank. This is a MAJOR mistake! And I have heard of people put in much worse situations because their property was not handled properly. There is a lot of pre-work to do and we must have contact with the bank BEFORE the house is listed to insure 1) You can qualify for a short sale & 2) They will accept a short sale on your property.
What is the difference between a short sale and a foreclosure? Overall, very little with the exception that a short sale can be handled more quickly than waiting out the foreclosure process, thus putting you more quickly on the road to financial recovery.
Why would any mortgage company accept less than what is owed on a mortgage? Mortgage companies are in business to lend money, not to own real estate. They do not want the extra expenses of holding and maintaining property until they can get through the foreclosure process and sell. Foreclosures are very expensive and time consuming, so many lenders will agree to what seems a loss on the mortgage, when in the long run, they will save money by not completeing the foreclosure.
Does a short sale still affect my credit like a foreclosure would? Reality is, short sale or foreclosure, your credit is going to take a hit. Both will impact your score and ability to purchase for at least 3-5 years. The common mis-conception is that negotiating with the lender to accept less than is owed is better than not paying anything and giving up the home to the lender. The lender views both the same-You signed a document agreeing to pay a certain amount and you did not. If you are thinking about a short sale, you have probably already started falling behind in some of your bills or mortgage, so the short sale can get you started on the road to recovery more quickly than waiting out the foreclosure process.
Are there any tax consequences of short sale or foreclosure? There could be and it is important that a CPA be utilized to advise on the possibilities of a 1099 being issued by the mortgage company to you and the IRS.
Is a short sale my only option besides foreclosure? Absolutely NOT! There are other options which I will be happy to discuss with you. You should weight out all of your options so you can make a well informed decision!
If you have further questions feel free to email me: LuckNetREG@comcast.net or call my cell at 443-912-4866. I am not an attorney or CPA and advise that you seek professional assitance for legal or tax advice.
If you think you might be qualified for a short sale, fill out this short questionaire and I will get back to you within 24 hours with a response.
443-384-6000 office 443-912-4866 cell
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