Here is some info regarding short sales. First of all what is a short sale? Otherwise known as "short pay-off", short sale is a transaction in which a Lender agrees to accept less than is owed, to permit a sale of a property upon which it holds a mortgage. The lender MUST be convinced that it makes monetary sense to agree to the Short Sale. The transaction is, conditional upon getting the Lender's approval/consent to this "short sale". The bank will typically want to see an Appraisal, List of proposed Closing Costs, Financial Statement of Seller, Pay-stubs, bank statements, tax returns, "Hardship" letter from the seller, Pre-Qualification from the purchaser, as well as many other documents. The contract of sale MUST contain certain language which is required in all of these transactions. A GOOD ATTORNEY IS PRICELESS!
The advantages of short sale go beyond the obvious, avoiding foreclosure. This type of transaction generally does not negatively affect the Seller's Credit rating, as much as Foreclosure will (i.e. typically 280 vs 80/100 FICO Points). It also reduces Sellers waiting period before buying another house (i.e. typically 36 vs 18 months).
One significant disadvantage of short sale is that the forgiving of the debt, by the lender, will be considere as "income" by the I.R.S.... meaning the seller will have to pay taxes on it.
I am a residential expert in Queens, with experience in short sales.
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