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Short Sales, Foreclosures and REO's

I was talking with an agent friend of mine today and she confessed that she didn't know the difference between Short Sales, Foreclosures and REO's.

If an Agent doesn't know, I'm sure many others are confused as well. Here is the scoop, and it's spread over the span of three posts, so you'll have to come back to my blog later for part 2 - Foreclosures and part 3 - REO's.

1. Short Sale: This is the name of the transaction where you owe the bank more than the property is now worth and the bank agrees to let you sell the property for less than what you owe the bank... you sell short... short sale.

Say you purchased the property for $ 100,000, with 10% down; you now owe $ 90,000. Because of the market, the value of your property is now only $ 50,000. You get an offer for $ 45,000 and the bank approves it. The buyer gets your property for 10% under market value, you are not foreclosed on and the bank gets the $ 45,000 instead of the $ 90,000 that you owe them and calls it even.

Your credit gets dinged, but not as badly as with a foreclosure.

The IRS used to send you a 1099 for the difference between the $90,000 you owed the bank and the $ 45,000 that you actually garnered the bank. In the eyes of the IRS you had made $ 45,000 and they wanted a piece of it. Not anymore (on your primary residence). Our lovely legislators have halted that practice for the time being. You won't get a 1099, but that doesn't mean that you won't owe capital gains taxes (Say what? ...More on that in another blog).

How do you get the bank to allow you to sell your property for less than what you owe them? You have to prove a hardship: you lost your job, you got sick, your spouse left you and she was the primary breadwinner... you get the picture. If you have money in a retirement account, a couple more properties, a boat and other toys, the bank will want you to pull the money from all those goodies and make up the difference. A short sale is not for those who are still financially comfortable.

Myrtle Beach Short Sales by Mirela Monte Join The Optimist Group!

Posted by Myrtle Beach Real Estate by Mirela Monte on 06/12/2008 09:32 PM

Comments (14)

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Originally posted at: Myrtle Beach Real Estate by Mirela : Short Sales, Foreclosures and REO's

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14 Comments on Short Sales, Foreclosures and REO's

JUN

2008

Great information for consumers. As an agent you should know this stuff

Good info.

Thanks for sharing.

Do you do many short sales in your market???

Agents should know this but most customers do not.

Chuck: Yes, there is still a lot of myth surrounding this topic and a lot of misinformation.

Linda: I've done shortsales in the past, but only to help my clients. The last 8 months I have been thrust into it full force. We just opened up another arm of the business the "Shortsales, Foreclosures and REO's" division. The last foreclosure sale Horry county had last Monday, was the largest foreclosure sale in Horry Co. history. The shortsale/foreclosures/REO business is now a core business. If you are not in the game you are losing out.

Russ: Thank you!

Could not have said it better. Great job. Most listing agents do not realize that they are working with seller but more the bank that owns the loan.

Simple and quick to the point my friend. Can you give me some classes? :-)

George: That would be like the egg teaching the chicken...

Susan: Thank you! You should say it; it will garner you the shortsale/foreclosue/REO business in your area... Never underestimate the power of "the Google"...

There is a lot of dysfunction on the topic of short sales and REOs, Most Buyers do not get it! Thanks for your post

Jean: I agree. That's why I wrote these posts.

Thank you for commenting!

Mirela......Informative post, let's home the Realtor get's it so they can pass it along to the consumer.

JUN

2008

Pam: The consumers will find this on Localism.com.

I wrote this for my agent friend and I will e-mail it to her.

Thanks for the comment!

Hi Mirela,

You're right. It's up to the banks to accept the offer - not the "homeowners." That seems the hardest part for everyone to understand. It's not a typical transaction. The buyers want to hear from the seller and it's sometimes hard for them to wait for the bank to respond in their time.

Thanks,

Terri Hayley

JUN

2008

Terri: Yup!

Thanks for the comment!

JUN

2008

I have a short sale currently on the market that the client owns a home with no equity and a 401k that I guess can not be touched. So we are going at it that my clients will just walk away from the home or all or part of the difference in the sale price is put onto the current home they live in. Although they are ready to let there credit take the ding with a foreclosure which hopefully I can talk them out of that.

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