Short Sales and Properties

Homebuyers these days will come across properties classified as a short sale more often than not. This is when a homeowner attempts to sell his home for less with lender approval rather than the lender taking it back through foreclosure proceedings. By doing so the homeowner could salvage his credit rating and rid himself of the encumbrance of a huge mortgage.

Pros

• No Foreclosure – Foreclosures can be a very hard and stressful process .
• Being proactive – Some control over the process, of choosing a short sale, finding a buyer, negotiating terms with the bank.
• The huge effect on your credit score by a foreclosure can be dodged.
• Start Newer, Faster – Minimizing damage to your credit score can help you and your family get back on your feet faster.  You’ll be eligible to purchase another house faster than if you entered foreclosure.
• May not owe anything after the Short Sale – You can try asking the bank to cancel your debt altogether. It does happen, but not all the time.

• There is still damage to your credit – When a short sale is done on your home, it is still documented on your credit but won’t have the same impact as a foreclosure The chances of getting a home loan will be slim during the ‘wait period’.
• Tax Consequences – there may be tax consequences if the bank forgives the debt and will issue a 1099 for the amount of debt forgiven.  This form is sent to the IRS to allow the bank to write off the loss.  The IRS treats the forgiven debt as a taxable income, which means you will need to pay taxes on the amount owed.  Although due to the “Mortgage Forgiveness Debt Relief Act of 2007” no taxes are owed on the forgiven debt.
• Lenders ca ask for payment for their Loss – lenders doesn’t have to forgive the debt and may ask you to pay them back for the difference on the sale and what is owed, but you’ll need to agree to this.  You can negotiate the provision out of the short sale or if they insist on the repayment, you could let it go into foreclosure.  It’s best to consult professional help regarding your specific situation.

As Realtors we sometimes list properties for short sale with lender approval and some property may still need lender approval, both are sometimes a lengthly process.  For the Buyer this is a bonus because he can currently buy and get more for his money, solid loan approval is required.

Currently Real Estate Central has several short sale home listed.  Please click on the Charlotte Area Homes Tag to review a list of these homes.