Short Sales
What is a Short Sale?
February 6, 2009 by Dale Kreiser · 1 Comment
Everyone’s talking about this new phenonemum called the Short Sale. What is it you ask? A short sale in real estate is not always a pleasant transaction. In times of declining home values, a homeowner can be caught in a position of negative appreciation. In other words, the current market value of the home is less than what is owed to the bank. This causes a problem if the homeowner experiences a hardship such as loss of work, or if he/she needs to relocate for any reason.
At this point the homeowner has 4 options available to him/her:
- Continue making payments until market conditions improve to sell the home.
- Do a Deed in lieu of foreclosure. Give the keys back to the bank and walk away.
- Quit making payments and allow the home to be foreclosed on by the bank.
- Do a Short Sale
A Short Sale is when the homeowner procures a buyer that is willing and able to purchase at a price less than what is owed to the bank. Next you have to get the bank to agree to take this lesser (or short) amount. This is where having a trained professional on your side makes all the difference. The bank won’t want to let you off the hook too easily, and not without plenty of proper documentation.
As a Real Estate agent, I am not licensed as a lawyer nor a CPA and cannot advise on those consequences. Except for certain conditions pursuant to the Mortgage Forgiveness Debt Relief Act of 2007, be aware the I.R.S. could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. In some states, this amount is known as a deficiency. A Real Estate lawyer can determine whether your loan qualifies for a deficiency judgment or claim.
If you are considering purchasing a property listed as a Short Sale, I can offer you some advice and strategy. With a little patience, the upside in many cases is getting the Home you want for less than market value.
Call me…let’s talk Real Estate,
Dale Kreiser 360-319-6365
