Putting Together A Real Estate Short Sale
by Seth Asare
In today's tough economy, short sales have become more frequent. Often, homeowners find their properties are underwater. This means that homeowners owe more on their mortgage than their property is worth. In these cases, short sales can provide a way out for both borrowers and lenders. Homeowners may be wondering what is a short sale in real estate.
When a property is sold for less than the remaining mortgage balance, that is called a short sale. Lenders decide that foreclosure proceedings are more expensive than selling at a loss. They then discount the mortgage balance and sell the property. The forgiven amount is not taxable for some homeowners.
A lender can authorize these transactions before a borrower defaults. Other lien holders, however, may object. These might be people who hold a tax lien over the property. They could also be the providers of a home equity line of credit. In some cases, the main lender and lien holders may not forgive the outstanding balances. The rules for this vary from state to state.
Borrowers can also benefit from one of these transactions. Instead of a foreclosure on the credit report, the borrower will have a settlement. The settlement will stay on file for seven to ten years. With a settlement, and not a foreclosure, the homeowner may qualify for a loan in less than two years. He or she may also qualify for another mortgage in less than seven years.
Homeowners can initiate the process by calling the lender. When they call, they should ask for the loss mitigation department. They may have to make several calls before they find a person with the authority to authorize the transaction. If they choose representation, they should write a letter of authorization to the bank. This allows the bank to disclose information to a realtor or an attorney.
Banks will also want to see a letter of hardship. Homeowners should be brutally honest when composing the letter. They should list out job losses, medical bills, and other difficulties. Banks will understand legitimate challenges. They will not understand either dishonesty or any criminal activity.
It is a good idea to retain a professional. A realtor with short-sale certification is a must. A homeowner may also need to employ an attorney and a title company. Professional handling assures homeowners that the sale will close in time to circumvent foreclosure. The lender, instead of the homeowner, pays the realtor's commission.
Before purchasing one of these homes, buyers should do their due deligence. Find out if there are tax ramifications. Pay for a home inspection. Most properties in these transactions are sold as-is. Therefore, the buyer needs to know all possible information about the condition of the home. Finally, a buyer should never give cash to a seller. This is a sure sign of a fraudulent transaction.
Today's real estate market is tough for both lenders and sellers. However, avoiding foreclosure is in the best interest of all parties. In these cases, it is important to know what is a short sale in real estate. It could be the least damaging solution for everyone.
What is a short sale in real estate Get the low down now in our super article on short sales and foreclosures on http://www.ebenezerrealestate.com
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