Understanding A Short Sale in Real Estate

There are ways to lose your equity in a home but signing away ownership and destroying credit should not be one of the them. Owners who can not afford to make their mortgage payments, have an alternative to bankruptcy or foreclosure. This is called a "short sale."

Short sales have become a standard procedure in helping homeowners move on.

When a lender agrees to a short sale, it means the lender is willing to accept less than the total amount due on the mortgage. Not all lenders accept short sales or discounted payoffs, especially if it makes more financial sense to foreclose and not all sellers nor all properties qualify for short sales. If a lender can make more money while still going through the foreclosure process the lender probably will.

If you are considering buying a short sale, please consult an attorney familiar with real estate short sales and consult your accountant to discuss any tax issuers. As a seller you will also want to consult both your attorney and accountant. Please also be aware of of the Mortgage Forgiveness Debt Relief Act of 2007. The I.R.S. could consider debt forgiveness as income, and lenders who accepts a short sale will sometimes pursue a borrower for the difference between the amount owed and the amount paid. This amount is known as a deficiency or deficiency judgment. A lawyer can determine whether your loan qualifies for a deficiency judgment.

If you are considering offering your home as a short sale:

• Call the Lender
  Find the person responsible for handling short sales and the individual capable of making a decision on your home
  .
• Submit Letter of Authorization to Discuss Your Finances
  Lenders will not want to disclose any of your personal information without written authorization to do so even to your attorney. If working with a real estate agent, title company or lawyer, you will need this letter to the lender giving the lender permission to talk with those parties about your loan. Include the following:
  
  • Property Information
  • Loan Number
  • Your Name
  • The Date
  • Your Agent's, Lawyer's, and title company's Names & Contact Information
  •  
• Preliminary Closing Costs Estimates
  Estimate the closing costs that show the sales price you expect to receive and all the costs of sale including loan balances, outstanding payments and late fees, real estate commissions and costs. The bottom line should show no cash to seller.
• Hardship Letter
  State the facts of how the short sale has become necessary including how you got to this point and request the lender to accept less than full payment. A short explanation of how the short sale will benefit the lender.
• Proof of Your Income and Assets (Complete Financial Statement)
  Be truthful and honest about your financial situation and disclose all assets. Savings accounts, money market accounts, stocks or bonds, negotiable instruments, cash or other real estate or anything of tangible value should be included.
• Copies of Current Bank Statements
  The lender will want an accounting of deposits, large cash withdrawals or an unusual number of checks each and every deposit so it can determine whether deposits will continue.
• Comparative Market Analysis
  Since property values sometimes fall and this is a reason that you cannot sell for enough to pay off the lender, this should be indicated with an appraisal or comparative market analysis.
• Purchase Agreement & Listing Agreement
  When you reach an agreement to sell with a purchaser, the lender will want a copy of the offer, and the listing agreement.

Hopefully, the lender will approve your short sale. You might ask that the lender to not report adverse credit to the credit reporting companies.

For help in Selling your Poconos Home Using a Short Sale call - USA Realty at 570-517-2428