The Short Sale

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There are many ways homeowners can lose a home, but signing away ownership from foreclosure or bankruptcy can strip an owner of dignity and their nest egg. 

The option of a "short sale" or "discounted payoffs" may make more sense for the homeowner; however, there are some issues relating to these kinds of real estate transactions.

The first issue, other than the Mortgage Forgiveness Debt Relief Act of 2007, the home owner should be aware the I.R.S. could consider such an act of debt forgiveness as income.

There are no guarantees that a lender who accepts a "short sale" will not legally pursue a borrower for the difference between the amount owed and the amount paid. In a few states, the amount is known as a deficiency.

The second issue is, even if the property does qualify, not all lenders will agree to do a short sale or discounted payoffs.

So when going though the varying requirements remember the following:

When calling the lender do not speak with the "real estate short sale" or "work out" department(s); rather, get the supervisor's name, the name of the individual capable of making a decision.

You will receive better cooperation if you prepare a "Letter of Authorization" to the lender (giving the lender permission to speak with third parties).

The letter should include the following: 

- Property Owners Name
- Property Address
- Loan Reference Number
- The Date
- Agent's Name
- Agent's Contact Info

Some of the other documents needed to have a successful short sale are: 

•Preliminary Net Sheet
•Hardship Letter
•Proof of Income and Assets
•Copies of Bank Statements
•Comparative Market Analysis
•Purchase Agreement & Listing Agreement

Often home seller are told to get an experienced 
listing agent that has handled a short sale; however, no matter the experience level, if you convey confidence with what is involved, and have the above, most individuals will have the confidence in you and your abilities.

Comments (1)

yanni raz

What Is Hard Money and How Will It Benefit You?


Have you heard the term "hard money," but you're not sure what it means? Perhaps you know what it is, but you're unsure where to find it. Hard money is financial backing from private investors in the form of a loan. It is one of the best ways to get a business project off the ground, but you have to know how to obtain it the proper way.


Hard money loans are often used for construction projects. Typically, the lender loans the money in stages. For example, let's say you own a plot of land and you want to develop it. A lender will agree to back you on the project. They will loan you a percentage of the money at the beginning of the project,more during the middle of the project and a final installment near the completion of the job.


Lenders often pay the contractor for their work directly. For instance, once your contractor completes the foundation of the new building, the lender pays them a specific amount directly. Then, when the electricians finish wiring the building, the lender pays them directly as well. All contractors receive their payments direct from the hard money lender.


Private investors often prefer this approach because it gives them greater control over their money and their investments. You don't have to be a big real estate mogul to get hard money from investors. Many investors are willing to support many different types of projects. Private investors will financially back projects like single family residences, condos, townhouses, apartment buildings, hotels, motels, office buildings and shopping centers. However, they will not usually invest in undeveloped land.


While hard money lenders are willing to loan to residential investors, they most frequently invest in commercial real estate. This is due to today's instability in the housing market. Commercial investments are simply a safer bet for recouping funds an investor puts into a project. Because of skyrocketing foreclosure rates in the modern housing market and property values dropping at record rates, there is considerably less risk involved for the investor in commercial projects.


Commercial real estate is a very competitive market, but hard money investors are willing to buy properties, remodel existing structures and even build new properties. The commercial real estate market is still alive and well. In fact, today's commercial market is very similar to the residential market that profited so many people just a few years ago.


Hard money lenders are still in the game. In fact, they are busier than ever because banks are making the lending process more exclusive than ever due to a record number of people defaulting on their loans. Knowing how the private lending process operates is half the battle when it comes to finding private investors for your commercial real estate project. With a little research and networking, you will find the perfect backer for the commercial real estate project of your dreams. The hard money for the project is out there; all you have to do is find it.

Aug 25, 2008 05:23 AM