SHORT SALES EXPLAINED
What is a Short Sale?
A Short Sale occurs when the property is sold for less than what is currently owed to your mortgage holders. An agreement is reached with the mortgage holder(s) to accept a loss and satisfy the loans. Financial hardship must be documented, such as job loss, medical issues, etc… Many mortgage holders are willing to accept a short sale in today’s market due to the declining market conditions. This is generally one of the last alternatives prior to foreclosure.
Short Sales can be a very involved and lengthy process, in some cases 3-8 months from the time of submission to actual closing. This process requires a great deal of patience from all parties involved. The reason for the lengthy process is the company you make your mortgage payments to is known as a “servicer”. They are not the actual “investors” backing the loan. The servicer reviews the short sale documents and then sends them to the investor for their approval. In some instances, there may be a mortgage insurance company involved that adds another layer to the process.
In an ideal short sale scenario, you will receive zero ($0.00) dollars at closing and the lender(s) agree to take a loss and consider the loan(s) satisfied. In some cases, the seller may be eligible for “relocation assistance” ranging on average from $750.00 to $3,000.00.You will be issued a 1099 for the amount of the loss which must be reported to the IRS. If the property you are selling is your primary residence, the IRS has issued the“Mortgage Debt Relief Act”(forgiveness) which is effective through 2012 and may result in being exempt from paying taxes on the amount claimed. Please consult your tax consultant for more details and information.
In order to be considered for a short sale by the lender you must first qualify.
First, answer these few questions to see if you may be eligible:
- Do you have a financial hardship that prevents you from paying your mortgage?
- Do you owe more on your home than it is worth in today's market?
- Are you in a situation where you really need to sell your home?
- Are you behind on your mortgage payments?
If you have answered yes to any of these questions, contact Mary Ellen today to see if a short sale is right for you.
General Short Sale Outline:
1. Contact Lender(s) to request short sale. In some instances, approval may be granted in advance.
2. The home is listed “for sale” with a reputable real estate broker at a very competitive price (usually below slightly market value).
4. Obtain an offer on the property
5. Seller accepts, rejects or counter-offers the prospective buyer’s offer.
6. An accepted (ratified contract) is then sent to the lender(s) for their review and acceptance. The contract will accompany your short sale package. This can take anywhere from 3 weeks to 5 months (or more) depending on the lender(s).
7. Once the lender(s) agree to the short sale they will issue written notice containing the terms of the sale. Settlement on the home will usually have to occur within 15-30 days of lenders acceptance.
8. Settlement (closing) occurs.
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