Benefits of a Real Estate Short Sale?
The first and most obvious would have to be that you will not have a foreclosure on your credit report. This is a definite plus. An experienced short sale Realtor will be able to help you sell your home and eliminate the debt from a mortgage you may not be able to afford. You need a Realtor that is up for the challenge because there are are many real estate agents that will not even know where to begin because they don’t have experience doing real estate short sales. It’s unfortunate but many Realtors can’t even explain the foreclosure process.
Another benefit of a short sale may be that it will allow you to avoid a bankruptcy. One option that many people consider to give them additional time in the foreclosure process is to file a bankruptcy but this option depends on the state you like in. One misconception of a real estate short sale is that you will have to pay the real estate commissions out of your pocket if you are approved for a short sale. If your property is accepted as a short sale and the deal is able to close, you won’t have to provide closing costs to close the deal. The bank will pay all of the closing costs and Realtor commissions when they approve a short sale. Often they work the agents down on their real estate commissions but this item is not something you will have to pay or worry about. All of the items paid in escrow at closing are factored into the banks expense when they decide to approve a short sale.
If the short sale is approved your Realtor may be able to save you from having a Deficiency Judgment issued against you for the short fall in the amount collected from the short sale and the final balance of the Summary Final Judgment. Many of the states have different laws and guidelines for their foreclosure process so be sure to check what applies in your state.
Another thing to keep in mind is that congress has recently passed new laws that will eliminate the short sale amount from being taxed as ordinary income. In the past borrowers that completed a short sale would receive a 1099 at the end of the year for the amount of money that the bank took as a loss. Under the Mortgage Forgiveness Debt Relief Act of 2007 (H.R. 3648) homeowners that do a short sale on a primary residence will not have to pay taxes on the short sale amount. This does NOT apply to investment property. This new Mortgage Forgiveness act is only for Primary Residences.
If you have any questions about real estate short sales please feel free to ask. We handle real estate short sales in San Diego County but also know agents in other parts of the country that we may be able to refer to you.
April 4th, 2008 at 12:02 am
[...] Metropolitan Real Estate Blog wrote an interesting post today onHere’s a quick excerptBenefits of a Real Estate Short Sale? April 3rd, 2008 The first and most obvious would have to be that you will not have a foreclosure on your credit report. This is a definite plus. An experienced short sale Realtor will be able to help you sell your home and eliminate the debt from a mortgage you may not be able to afford. You need a Realtor that is up for the challenge because there are are many real estate agents that will not even know where to begin because they don’t have experience do [...]
May 1st, 2008 at 8:26 pm
I have a friend that is doing a short sale or I think it’s a shot sale. Isn’t a short sale when you sell the home for less then what you owe the bank? How does this effect your credit compared to a foreclosure?
May 2nd, 2008 at 12:38 am
I have read a lot of various sources about how people are so apposed to H.R. 3648 bill. Is it OK for the government to come in and bail out large corporations that were the creator of all of these loans but when it comes to the individual that was being told they were being provided a good loan then they are being left high and dry?
This bill will have less impact financially on this country then 2 days in the Iraq war. The projected cost of this bill is nothing compared to the impact of good it can do.
May 2nd, 2008 at 5:57 pm
My team has been involved in a few short sales now. It’s a little frustrating for the buyer to wait for the answer from the bank. One we have in Safety Harbor FL has been been going in for a few months.
July 16th, 2008 at 9:57 am
We will see an increase in short sales due to the changes in the mortgage industry. Many homeowners will find themselves working with a REALTOR and negotiating with their lender to sell their home for less than they owe. This is a complicated and lengthy process but is a much better alternative for the home owner than having a foreclosure on your credit history. Thanks for the article.
August 18th, 2008 at 11:53 pm
I agree with Safety Harbor. These deals can take months. We are working on one for a client right now that has been screwed up by both agents for months. Our client, the buyer, has been put through the ringer with these two agents. Their actions are borderline criminal. In the end, I am amazed that the lender is even putting up with their shenanigans. We hope by next week the transactions can finally close.
I read that less than 5% of short sales actually close - I now know why.