The Benefit of a Short Sale to a Home Owner

Services for Real Estate Pros with Power Rentals & Investments, LLC

With all the Media Coverage of Short Sales, I can't imagine anyone Not being familiar with a Short Sale. If Somehow you've escaped all the Chatter, here you go....

A Short Sale is the Transaction in which the Lender agrees to accept Less than the amount of the Total Mortgage Owed. What this means to you as an Interested Home Seller is:

                            1. The Difference of the Debt CAN be Forgiven by the Lender  OR

                       2. The Difference of the Debt MUST be Settled with the Lender

Either way, if you have ZERO equity in your Home, a Short Sale may be Less Damaging to your Credit History than a Foreclosure. Lenders usually incur Less Costs from a Short Sale than a Foreclosure.

Comments (6)

Craig Snead
Quality Home Investments, LLC / Dearborn Heights, MI - Dearborn Heights, MI
Real Estate Investor

Sheri, there is a lot of unknowns about the short sale process. I have read that it can take months to go through and that there is a possibility of streamlining that into a three week period.    

And the big question:  After the short sale is final, can the lender still come after you to collect on the forgiven debt?

Feb 10, 2010 10:53 PM
Tom Boos
Sine & Monaghan Realtors, Real Living - Grosse Pointe Farms, MI
Providing the very best of service to Sellers and

Your post is a good little "thought starter" but there is so much more to the short sale puzzle.  And, Craig is correct that a successful short sale for the homeowner MUST include assurance that the debt is forgiven in total.  Although, some short-sellers do agree to sign personal notes for all or part of the deficiency.

Feb 11, 2010 01:51 AM
Sheri Rogers
Power Rentals & Investments, LLC - Desoto, TX

Very true. There isn't a specific road map to dealing with short sales. The process, requirements and time frame varies by lender. I've found that the forgiven debt is addressed before closing with the lender's intentions.

Feb 11, 2010 02:46 PM
Ron "The Ronald" Nawrocki
B.I.Solutions Corp. - Buckeye, AZ

Deficiency judgements is indeed pifall #1 for the seller. The lender can file anytime within 2 years.

A good realtor or investor working the short sale needs to ensure the deficiency is released or negotiated to a manageable amount.

NOTE: it is possible to spread out payments over several years, with 0% interest. Many sellers give up without negotiating the deficiency.

That said - short sales is our preferred source for buying properties ... we have time, and most buyers planning to live in the home give up and leave the deal for us to buy at lower prices. Many of the owners want to stay in the property ... and we have a Lease-to-Own program that lets them re-buy it later !

 - The Ronald

Feb 17, 2010 03:07 PM
Jeremy Butts
Real Estate Entrepreneur - Louisville, KY

Here's an interesting news article that talks about a program that starts in April that will guarantee forgiveness of short sales.

I also remember reading somewhere that the IRS would NOT require short sale sellers to claim the write-off as income. Previously this WAS required and I believe that the new policy is only temporary.

Definitely, ask your CPA!

Feb 23, 2010 06:02 AM
Ginger Harper
Coldwell Banker Sea Coast Advantage~ Ginger Harper Real Estate Team - Southport, NC
Your Southport~Oak Island Agent~Brunswick County!

It is so much better to do a short sale rather than to go bankrupt.

Mar 04, 2010 07:17 AM