You have probably heard the term "Short Sale" on the news or in a newspaper article about the Sub-Prime Housing crisis.  But do you really know what a Short Sale Means?

 A Short Sale occurs in real estate when the outstanding obligations (liens) against a property are greater than what the property can be sold for. In order for a Short Sale to close successfully, the lienholder(s) need to agree to FORGIVE a portion of the debt that is secured by the Real Estate being sold and accept a discounted mortgage payoff.

 What are the Qualififications for a Short Sale?

1.)Comparable sales in the area must substantiate that the home is worth less than the unpaid balance due to the lender(s).

2.)The sellers are in or near default.

3.)The sellers must prove a hardship and inability to payoff the loans.

There are advantages of doing a Short Sale, rather than going into Foreclosure.  The main advantage is the impact to your credit.  Of course, it depends on how early the short sale begins and whether a Notcie of Default has bewn filed.  Your credit is negatively affected for 1-3 years, but you may possibly qualify for new mortgage within 18 months.  In a Foreclosure, your credit is negatively affected for 7 to 10 years, and it may take much longer to qualify for a new mortgage again.  Always consult with you Tax Accountant or a Real Estate Attorney to find out how this will specifically impact you.

Debt Foregiveness and Tax Consequences

Usually debt that is forgiven or cancelled by a Lender must be included as income on a Taxpayer's income tax return.  The Mortgage Forgiveness Debt Relief Act MAY allow exclusion of income IF debt is secured by Taxpayer's principal residence. Consult an Accountant.

What is the recipe for a successful Short Sale?

1) A Cooperative Seller  2) A Knowledgeable Listing Agent  3) A Cooperative Lender(s)  4) A Patient Buyer and 5) Competent Escrow Officer and/or Short Sale Facilitator

If you think you may be qualified for a Short Sale, please contact Mary Aguilar (831) 277-1073 for more information.  This could be the answer you are looking for to begin again and find relief from financial stress and difficulties.

Mary Aguilar, Realtor, GRI, ABR, e-PRO

John Saar Properties

Carmel, California