What is a Short Sale & Some Things You Should Know
What is a Short Sale?
A short sale is a transaction where the net proceeds from the sale of a property are not enough to cover the sellers mortgage obligation and closing costs, such as property taxes, transfer taxes, and real estate commissions.
ONLY Real Hardships Get the HELP!
Purchasing or refinancing your house during the housing boom is not a legitimate hardship. Banks actually review and analyze short sale sellers hardships and most center of the economy. In short the banks are going to verify the short sale is in their best interest, not the sellers. What are acceptable hardships? medical issues, divorce, disability, significant loss of income, death, unemployment, and relocation.
Laws Are Local(State)
Foreclosure laws vary from state to state and it is important to remember there are currently no short sale laws on the books. Federal guidelines are in place, however the bank does not have to do anything they do not want too. If you decide to move forward in selling your home as a short sale there are a few things to keep in mind.
1) If the bank approves the short sale will there be a deficiency amount owed for the difference between your mortgage amount and sales price, minus fees?
2) Will the bank accept a “Deed in Lieu of Foreclosure”? With a deed in lieu of foreclosure, the property owner gives the property to the lender voluntarily in exchange for the lender canceling the loan. The lender may or may not agree to forgive any deficiency balance that results from the sale of the property.
3) Potential Tax liabilities- Under federal law, a creditor is required to file a 1099C whenever it forgives a loan balance greater than $600.00 which could create a tax liability for you. However the Mortgage Forgiveness Debt Relief Act of 2007 provides tax relief for some loans forgiven in 2007 through 2012.
Lastly, please seek the advice and consult with an attorney, and possibly accountant, experienced in bankruptcy law to understand all of your options.
“Until Next Time”