Here is your Short Sale FAQ
Facing the reality of the possibility of a short sale leads each and every homeowner to question what a short sale will mean for them and wondering what to really expect.>
To put it quite plainly, a short sale will cost the bank less money than having to foreclose on the property.While the homeowner usually can avoid paying a few monthly payments while waiting for the property to sell, it is less costly for the bank to short sale than undergoing foreclosure and having to fork out cash for lawyers, legal fees, landscapers, rehabilitation on the home, homeowners association fees etc.
What happens to my credit?
While it is truly difficult to say explicitly how a credit score will be affected by a short sale it is clear that a credit score could face a hit of a few hundred points.Outside of this it is important to understand the laws of your state. In “recourse” states, banks are able to go after (seek legal restitution) homeowners for the difference between the amount owed on the note and the amount for which the home was sold.Non-recourse states on the other hand force banks to drop this amount.
It is worth a one-time fee to an accountant to discuss the tax ramifications of the short sale. No matter if you live in a recourse state or a nonrecourse state, banks will undoubtedly dispense a 1099 making you liable for that difference between the mortgage balance and the sold amount as income.
What types of homes can undergo a short sale?
All types of homes undergo short sale.Typically short sales were conventionally completed to sell off homes in less than desirable condition to draw in buyers on the unwanted property.These days it is more likely that the property is being short sold due to the lack of equity in the home or the homeowner’s inability to make the monthly mortgage payment.
I’ve heard so many horror stories. What is the key to a successful short sale?
First and foremost take a deep breath and expect a less than fun experience in selling your house. Typically there will be a myriad of forms, applications and disclosures to complete.You will have to describe the circumstances surrounding your wish to complete a short sale, the more explicit the better.From there you will need to prove financial hardship all before being able to even be considered for a short sale.
Real Estate Agent. Let me repeat that, a real estate agent experienced in short sales. Your real estate agent can make or break your ability to sell your home and help navigate the sometimes-agonizing contract approval process.
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