What is a Short Sale?

Short Sales are those things that every buyer’s agent and buyer avoids.  They are avoided mainly for their unknown factor.  The largest unknown factor is the timeframe.  How long before I know whether my offer is accepted?  After my offer is accepted, how long until we can close?  I can explain and clarify a little of the process.  I currently have several houses listed in a short sale status and I am also involved on the other side of helping some buyers make offers on short sale houses.   A short sale is created when a home owner, because of extenuating circumstances, can no longer afford their house or more often, they must relocate for some reason.  The main reasons that we see for short sales in this area are layoffs or loss of employment.  In a short sale, a homeowner is current in their house payment, but for reasons outside of their control, they do not know how long they will be able to maintain their payments.    The first thing that a home owner must do is to contact their lender and have the short sale discussion with them.  The home owner will be required to prove their hardship.  If the lender accepts their premise of a hardship, the home owner is allowed to list the property as a short sale.  This simply means that the fair market price of the house is less than the loan payoff of the house.  The bank, because of the circumstances, will allow the house to be sold for less than is owed on it.  It is very important for the home owner to have representation through a real estate agent to help guide them through the process.  It is also very important for the home owner to discuss the ramifications of the short sale on their taxes with the lender and a tax expert.  There are several ways that the difference owed can be handled and each case is different.  The home owner could be responsible at closing for the difference in what is owed and what the house actually sold for.  The difference might be forgiven, but there may still be tax consequences to be considered.  Your real estate agent will be invaluable to you with the forms and the process, but they are not tax advisors and should not be giving you tax advice.  A short sale is an excellent way to possibly avoid foreclosure.  I learn more everytime that I am involved in a short sale transaction.  If you have questions or if you possibly think that a short sale may be an option for you, please feel free to give me a call or send me an email.

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