WHEN A HOMEOWNER MAY CONSIDER A SHORT SALE

By
Real Estate Agent with Keller Williams Realty - Atlantic Shore

WHEN A HOMEOWNER MAY CONSIDER A SHORT SALE

 

A Short Sale simply put, is selling a property short. This means that if a person owes 200,000 dollars on their house and the market value will only bring buyers at 170,000, you are forced to ask the bank to take less money than what is owed to them. Why would a bank even consider something like this (another good question)? Most people who are in a position where they need their Realtor to negotiate a short sale are typically not in a good position financially. This could be for many reasons, the most common is an unfavorable loan that adjusted to an interest rate (Subprime loan) that now increases the mortgage to a payment that the owner can no longer afford. This is the situation that most people are facing that are in a short sale situation.

The lender will not always consider a short sale in this situation, some of the reason for that are for the following reasons:

  • The offer that is submitted to them is unreasonable by their standards and is not supported by the BPO or appraisal. (Typically the bank will not give more than a 20 percent discount to a buyer) There are a number of factors that come into play, but this is a general rule.
  • The seller does not have a good case or justification for the short sale. Most of the time, the bank needs to have some sort of hardship (Loss of Job, health problems and so on) in order to consider a short sale.

A short sale is not for everyone, but for those in a loan modification process working directly with the bank, a short sale is statistically for about 70 to 80 percent of those people. Here is the upside of a short sale if it is done correctly. Upon the sale to a qualified buyer, with all lien holders in 1st, 2nd position agreeing to it, once the property is sold the bank most of the time will agree that your debt has been satisfied. What does this mean for you? The bank will not come after you for the difference and place a judgment against you. Be aware that you must get this in writing, but the banks will agree to it in the majority of cases.

For more information on Short Sale, please feel free to give me a call.

JULIE STARADUMSKY

KELLER WILLIAMS REALTY ATLANTIC SHORE

200 TILTON RD.  SUITE #5

NORTHFIELD, NJ 08225

(609) 484-9890

www.SJshoreRealtor.com

STAR@KW.com

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Wishing You The Comforts Of Home.

 

Julie Staradumsky

Keller Williams Realty - Atlantic Shore

200 Tilton Rd.   Suite #5

Northfield, NJ 08225

(609) 484-9890     fax:(877) 773-6675

Star@kw.com      www.SJshoreRealtor.com

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Rainer
28,727
Darla Jensen
Edina Realty - Crosslake, MN

Hi Julie, I'm working on my first short sale right now.  Great information and perfect timing for me!  Thanks.

Nov 20, 2008 01:34 PM #1
Ambassador
2,079,567
Fernando Herboso - Broker for Maxus Realty Group
Maxus Realty Group - Broker 301-246-0001 - Gaithersburg, MD
301-246-0001 Serving Maryland, DC and Northern VA

a deficiency  judment still can torment the  seller later on. . unless your approval ststes otherwise.

Nov 20, 2008 01:34 PM #2
Ambassador
554,125
Larry Story
Total Care Realty - Greensboro, NC
Total Care Realty, LLC, Greensboro, NC Real Estate

Julie but, while they agree to take less and write off the debt they will get a 1099 at the end of the year from the bank.  They will then have to declare the loss of income from the bank (the "short" amount of the payoff)  as income.  That is the one piece most people forget.  Uncle Sam does not just let the banks make that money disappear someone is going to have to be accountable for it.  So the bank passes the buck.  The sellers can be prepared for this if they have a good agent that is accustomed to doing short sales.   With the proper forms they may be able to get a forgivness of the tax burden from the 1099.

Nov 20, 2008 02:04 PM #3
Rainer
82,537
Julie Staradumsky
Keller Williams Realty - Atlantic Shore - Northfield, NJ
CREN

Morning Larry, I am aware of the forgiveness.  And correct when you work with a good agent they will definitely try to have the bank forgive the 1099.

Nov 20, 2008 09:42 PM #4
Rainer
478,183
Not a real person
San Diego, CA

Many banks here require the potential seller to be at least three months behind in their mortgage payments. In other words, a notice of default has been filed. That's about the only thing they will consider as justifying "hardship." It's weird.

I understand the Appraisal Institute is investigating the legality of BPO's, as well. I think they have a good case. A rose by any other name is still a rose. I look for BPO's to be declared illegal or come under the umbrella of the Appraisal Institute's guidelines.

Nov 22, 2008 04:33 PM #5
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Julie Staradumsky

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