The purpose of this blog is to provide information for home owners who are considering a short sale on their home. If you have any questions that may not be answered in this website or blog please call me at 703.587.5403. I am here to help any way I can.
Short sales are created when the homeowner needs to sell their home for any reason and the home value is currently less than the loan that is on the home. This creates a short situation for the lender and seller in getting the loan paid in full with the house sale so the bank has to approve the transaction to allow it to go through.
There are all sorts of reasons why a short sale is needed. A homeowner who is employed and making ends meet fine but who's home value is less than what they owe is not likely to be approved for a short sale by their lender. However it is always good to check with me to see if you may qualify. Things like work transfers out of the area, excessive debt, loan interest rate adjustments, illness, divorce, death of loved one, decreased income etc. can qualify you for a short sale. Let me first say in some situatons of financial difficulty a loan modification may work so call your lender and see if your lender will decrease your payment to make things work. Unfortunately there are many situatiosn where this is not enough and homeowners have to sell anyway.
How does a short sale work?
Your home is put up for sale just like any other sale. Once a contract is signed by you and the buyer the contract is submitted with your documentation showing the need for a short sale. The bank does some data collecting to determine the value of the property and evaluated the offer submitted and a letter of approval is issued. Sometimes the bank has terms they want agreed to by the seller to approve the short sale. A promisorry note or cash paid at settlement are examples however often the seller does not need to pay anything. If there are 2 liens on the property then both banks need to approve the short sale and each lender needs seller documentation and the sales contract.
The real estate commissions are paid by the lender and not the homeowner. Often the sellers credit can be affected by a short sale. This is often because they may be paying their mortgage late prior to the short sale. In addition the recordation of the short sale can affect credit as well. However the effects on credit and long tern consequences of a foreclosure are worse so a short sale is the way to go. If you have security clearance for your job this can be an important issue to consider in a short sale. It will of course depend on where your credit score was when you begin the short sale and whether you are late in monthly payments or not.
Each seller is different and each bank is different so it is vitally important as you hear about short sales from friends or co-workers to remember each deal is VERY different. Get an agent that had completed short sales succefully, be cooperative with that agent and the bank. Look at your approval letters carefully and have an attorney look them over. Also before you begin the process have an accountant review your tax liabilties for any foregiven debt in a short sale. If you are thinking about a short sale do not wait. The tax on the debt your mortgage lender may forgive has been temporarily waived by the Obama administration until 2012 but it will be back eventually and the day will come where homeowners will have to pay tax to the IRS on debt that is forgiven by the lender.
Call me at 703. 587.5403 and get all your questions answered if you are thinking about a short sale.
