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Short Sale Basics - Fifth and Final in a Series

By
Real Estate Sales Representative with Capstone Washington Real Estate, LLC

In this series we've talked about what a short sale is, how they're advertised, and how offers are made and presented to the seller's lender. Today we'll finish up with the overview and discuss the implications of a short sale to the seller.

Once the seller's lender accepts a buyer's purchase agreement, they will send a Short Sale Package or Agreement to the seller. At this point a seller should consult with an attorney and a tax professional to assess the terms. Real Estate agents can NOT offer legal and/ or tax advice! While many good agents have knowledge of the implications of the short sale, it is outside of their profession and fiduciary duty to provide this type of advice to their clients. There are two main issues that must be discussed. First, some lenders require the seller to carry the "short" amount as an unsecured debt for which they are still liable. If the seller doesn't pay this debt off it could result in a judgment lien against any real estate the seller owns now or in the future. Other lenders consider the remainder of the debt to be forgiven with the successful completion of the short sale and agree to never seek payment of the forgiven amount.

Second, if the seller had taken cash out in a refinance, the forgiven debt may be considered as income for tax purposes. This would result in the seller having to pay income tax on the amount of forgiven debt. The seller will need to speak with an accountant or tax specialist about this issue. There are times when, depending on the outcome of these issues, it would be best for the seller to let the property go into foreclosure instead of selling as a short sale. The seller will need to assess the overall risks and benefits of proceeding with the short sale.

Every short sale transaction is different and there is no way to predict with certainty what a seller's lender is going to do. It is the lender that is in control in these situations and the best an agent can do is stay in close contact and stay alert to what's happening. Ultimately, if the lender doesn't think they will receive enough from the sale, it won't be approved. As we've said before, selling and buying a short sale property is a long, time-consuming, often gut-wrenching experience. A good Realtor will be able to guide you through the process and help you reach your goals. If you have questions about buying or selling any real estate, please call the JMC Group at 360-609-6775. Or go to the "Contact Us" portion of our website at www.MyRealtorIsJamie.com. We are here to help!

Lesson 1: http://activerain.com/blogsview/765054/Short-Sale-Basics-First-in-a-Series

Lesson 2: http://activerain.com/blogsview/774079/Short-Sale-Basics-Second-in-a-Series

Lesson 3: http://activerain.com/blogsview/788057/Short-Sale-Basics-Third-in-a-Series

Lesson 4: http://activerain.com/blogsview/796213/Short-Sale-Basics-Fourth-in-a-Series

Lesson 5: http://activerain.com/blogsview/827035/Short-Sale-Basics-Fifth-and-Final-in-a-Series

 

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The S&B Real Estate Team assists people in buying and selling real estate throughout Southwest Washington. We are proud members of Premiere Property Group, LLC in downtown Vancouver. Our local expertise covers: Vancouver, Battle Ground, Camas, Washougal, Brush Prairie, Hockinson, Ridgefield, Woodland and La Center. If you or someone you know is considering living or investing in Clark County, please contact us. Steve Borwieck can be reached at 360-241-7305. Or drop us a note on the “Contact Us” page at www.ppgwashington.com. We are here to help!

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