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When short selling a property, you owe more money on the home than the home is actually worth. The bank agrees to allow you to sell that property in return for a lesser than owed payoff amount. In a down market, this may be the only option for a seller to sell their property. In the past, if a seller couldn’t sell the property for what they owed on it, they were forced to make up the difference themselves between what was owed on the home and what the home actually sold for. But in today’s market, homes can be so far under water that sellers do not even have enough money to bring to the closing table if they wanted to. In these instances, a short sale in necessary.
First let me clarify that I have closed hundreds of short sales in my career and every case has many different outcomes. The outcome I strive for is to negotiate with your bank to agree to allow the sale of your home for a lesser amount then what is owed and forgive your debt. Most banks are willing to allow a seller to short sell the property, the big question is, what will they want in return? This answer varies from case to case, but here are the possible outcomes and in my experience, the percentage of time they occur.
Many people wonder if they qualify for a short sale. Banks make you write what is called a “hardship letter” to explain to them why you think your short sale request should be considered. Some of the common hardships claimed are: loss of job, job transfer, loss or reduction of income, illness, growing family, degeneration of neighborhood, etc. The thing to remember is most of us will have some sort of hardship the bank will consider a valid reason to allow the short sale.
My goal is to usually list and close the home within 3-4 months. What dictates this time frame is the banks we are dealing with. Some banks are very, very slow. And some are surprisingly fast. I have closed short sales in as little as 30 days. But I have also had ones that took Seven months. Granted the one that took Seven months had 3 loans on it all of which I had to get approved buy 3 different banks.
No one likes filling out paperwork. But in a short sale, it is vital that you fill out the paperwork I provide, neatly and accurately. Realistically it takes the average person about one hour to fill out the packet and collect the necessary documents I need. But you will find that spending a little time up front and filling forms out neatly and accurately will allow the short sale process to run very smoothly. Keep in mind that when doing a short sale, we are allowed to put a price on the home of market value. What this means is that the home WILL sell and usually sell fast. The hardest part of the short sale is my negotiations with the bank. The actual selling of the home is almost secondary.
I am told I must refer you to your CPA for this question. But generally, if the home was your primary residence when you bought it, you are not required to pay tax on the forgiven debt. This is in effect until the later year of 2012. This is a benefit of the Debt Relief act of 2007.
I am told I must refer you to your attorney for this question. But generally the bank cannot if they put it in writing that they will not seek a deficiency. Some banks won’t put this in writing though because I was told that they always reserve their right to go after a deficiency, mainly because if they can prove there was fraud, they want to keep their options open.
No. The bank pays these costs on a short sale. The general rule is that the seller doesn’t bring money to the closing, yet they also cannot receive any proceeds from the closing. Basically in with $0 and out with $0
Ready to Short Sell Your Home?
Download each form below. Please fill out completely and
Fax to: 734-956-9778 or
Email: greg.morad@remax.net
