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Short Sales are an Alternative to Foreclosure If you are in a situation where you owe more than what your home is worth or if you need to sell but don’t have the money for the difference at closing, this may well be the most important article you’ll read about selling your home. You need to look at the option of short selling your home.
What is a Short Sale?
When your lender agrees to discount their payoff to accommodate the sale of your property.
When thinking about short sales, you have to keep one thing in mind; it is a very difficult transaction process that can easily cause more harm than good if not performed properly. This is why your choice in real estate agents may be the single most important factor determining whether the process is successful or not due to the complexities and sheer volume of issues that arise.
This is not a task to be undertaken by just any real estate agent. As a Certified Short-Sale Professional, CSP, I have been trained to navigate through the requirements that need to be met to get all parties to agree to the short sale. Finding a buyer is only half the battle. Once we have an able and willing buyer we must convince the lender(s) that they should grant you a short sale.
What Should You Expect During the Process?
1. Calculate the value of your property. This will be accomplished by preparing a CMA and looking at the competition in your area and the condition of those homes. We will need to price and position your home so that it sells quickly and at a high enough price so the lender will agree to the terms.
2. Calculate your home’s financial position. In this step we will examine the value from step 1 and compare this to the mortgages and other debt that is supported by the home value. If your home value is significantly less than your debt tied to the property you are a candidate for a short sale.
3. We will start searching for a buyer, especially those that have expressed interest in buying short sale properties. Not every buyer will want your property given the status and tenuous nature of a short sale. The buyer must be willing to deal with extended deadlines and additional demands made by your lender. Your lender is the key to a successful short sale transaction and we will need them to feel confident in the new buyer.
4. We’ll need to contact your lender and explain your situation. Lenders are under no obligation to accept a short sale and the terms will be examined closely by the lender. The lender is the ultimate decision maker and must give final approval for short selling your home. Lenders may disapprove of any aspect of the transaction without reason or justification. Lenders do not have to be reasonable. However, due to current market conditions, lenders are becoming more and more cooperative in considering and approving short sales.
5. There may be tax repercussions in enacting a short sale transaction. However, with the passage of the Mortgage Forgiveness Debt Relief Act of 2007 www.irs.gov,a taxpayer does not have to pay federal income tax on debt forgiven for a loan secured by a qualified principle residence. The tax break applies to debts discharged from January 1, 2007 through December 31, 2012. California's will expire at the end of 2009.
Part of the process we will cover is the tax liability that may remain after the short sale transaction is complete. As with any tax related matter we will advise you to seek counsel from a tax professional or tax attorney; as we are not CPAs and will not interpret tax laws in any way.
How Does a Short Sale Benefit YOU, The Seller?
Avoid having a "Foreclosure" on your credit report. FICO scores WILL be affected in varying ranges depending upon the circumstances. Some experts agree that having a short sale will decrease your FICO score significantly less than a foreclosure; however, the biggest BENEFIT is being able to purchase another home in 2 years time versus 4-10 years with a Foreclosure, or Deed-in-Lieu of Foreclosure. [Based on Fannie Mae guidelines]. FICO scores will be affected regardless, due to late payments or no payments during the process.
However, if a seller does not have a "60-day late pay", that seller may immediately buy another home. This is an excellent reason to stay as current as possible on your payments while your home is on the market as a short sale!
If your financial situation is such that you are unable to make your payments, you may essentially save money by staying in the home mortgage-free during the process.
Whatever the circumstances, SHORT SALES are a "respectable" option and keeps the home occupied during the sale.
How Does the Lender Benefit?
Eliminates having another "Bad Debt" on their books;
No expensive foreclosure process (legal fees and procedural duties);
They do not have to rehab the property (contractor bids,repairs, vandalizing, or property management);
Not having to later sell the property for no more than the proposed Short Sale would generate, or even less as the market declines;
Not having to pay an REO broker they choose to market and sale the property.
How Will the Housing Market Benefit?
The less homes that are foreclosed upon and approved via short sale, will ultimately help to stabilize the market, reducing the number of bank owned homes.
Summary
As a Certified Short-Sale Professional I can handle the challenge of short selling your property and prevent you from succumbing to the many pitfalls that can beset those who are not familiar with the process. If you would like more information or a FREE No Obligation Consultation Specific to your Home please CONTACT MARIA.
Thank you for putting your trust in me during this difficult period.
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