Selling Your Home As
A Short Sale
We specialize in helping homeowners do short sales, so contact us today for
help that costs you nothing. You personal information is kept strictly confidential.
What's So Good About A Short Sale?
 If your home is worth less than the amount you owe, you might be a candidate for
a short sale. Selling a home via a short sale is a legitimate method for
stopping the foreclosure process, allowing the homeowner to get on with life and
without a HUGH ding to their credit record. A short sale affects credit but it's
not as bad as a foreclosure. You can also live in your home during the short
sale and save money to move and rent a new place to live.
What’s the catch? In order to do a short sale you must have some type of hardship.
You will be required to write a hardship letter to your lender explaining why you no longer can make payments on your loan.
What Exactly Is A Short Sale?
By definition a short sale is literally the sale of a home for less money than is currently owed the lender on
the outstanding mortgage being foreclosed on. In other words the home is “upside
down“ from a financial aspect. Therefore, the catch is that in order to
successfully conduct a short sale, the foreclosing lender has to agree to it,
essentially agreeing to accept less money than it is owed on the loan secured by
the house. Unfortunately, there are many myths and misunderstandings about short sale so educate yourself.
Is A Short Sale Right For Me?
A short sale is not a vehicle normally seen during a seller’s market when
multiple offers are lining up at the door competing with each other for the
house. Short sales are most widely accepted during a buyer’s market when home
sales are dragging, home values are declining, and inventories of available
properties are growing to the point that the lender basically is just throwing
up its hands and saying some money for the house is better than no money at all.
Lenders are not in the business of owning real estate. They get upset when they
have too many properties on their REO (real estate-owned) books instead of out
in the market making it a profit through monthly mortgage payments. Plus, the
foreclosure process is not free. Every house they foreclose on costs them
thousands of dollars. So, in some instances, agreeing to a short sale is in the
lender’s best interest.
It is up to the homeowner to convince the lender that this is one of those
circumstances. It’s a matter of financial numbers, economics and hardship. The homeowner needs to demonstrate to the lender hard
evidence
that will lead the lender to conclude that selling via a short sale is going to
benefit them more than the amount they would garner from foreclosing on the
property and then selling it as an REO.
Are There Any Drawbacks?
However, keep in mind sometimes, but
not always, there is one major downside to a short sale. As much as
the lender wants to keep the property off its books, it also wants the money
it’s owed. In some situations the lender may make it a condition of agreeing to
a short sale that the homeowner sign a promissory note to make up all or part of
the difference between the proceeds from the short sale and the amount owed on
the original debt. Normally the promissory note is not for the full amount
forgiven and bears zero percent interest. Occasionly short salers may opt for
bankruptcy
to avoid paying a promissory note.
You should also be aware of any tax ramification when
short selling your property. For any forgiven debt your lender allows, your lender will file a 1099-C tax document which is recognized by the IRS as income. However you are allowed to sell your home (if it is your primary residence) and make up to $250,000 as an individual or $500,000 as a married couple, tax free, so normally this is not a problem.
Where can I get more advice?
For your protection, it is recommended that you:
- Obtain legal advice from a competent real estate attorny to review contracts and paperwork.
- Call an accountant to discuss short sale tax ramifications.
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