Short Sales

Are short sales short? Negotiating a short sale between the seller and their lender takes skill, patience, and expertise. Everyone involved in the transaction needs to know what to expect.

1. The seller’s credit rating will be negatively affected after doing a short sale, but not as much as with a foreclosure. We have heard estimates of a drop of 80-100 points off one’s FICO score. That kind of drop is far less damaging than how a foreclosure can affect your credit score.

2. The seller will receive a 1099 for forgiven debt and will owe taxes on the amount on their primary home, up to a certain price. That may change at any time. In some cases, there could be deficiency forgiveness.

3. The seller should check with their accountant to see if they meet the IRS definition of insolvency, (debts exceed assets), they will not have to pay taxes on the forgiven debt. We are not giving tax advice, that’s not our expertise. Talk with a competent tax accountant about how a short sale may affect your tax situation.

4. During the transaction the lender might ask the seller to sign a promissory note for all or part of the deficeincy as a condition to the short sale. Remember, everything is negotiable in the short sale process.

5. The US House of Representatives has passed the Mortgage Cancellation Tax Relief Act (H.R. 1876), which would eliminate taxes on any forgiven debt on a principal residence through a short sale or foreclosure.

6. In some cases, you may be able to get a mortgage again after 2 years, depending on your history of paying all your other bills on time after the short sale. This will help your credit score improve rather quickly.

7. The short sale process can take several months. This is not a quick process. It can easily take three to six months or longer.

8. Buyers need to know ahead of time that short sales are not a quick process and must have the patience to wait for the lender’s approval and not back out. Sometimes buyer’s back out after the firat expiration period, this is a risk the seller takes when a contract is signed.

9. All commissions, expenses, fees, and closing costs can come out of the short sale proceeds. However, sometimes the seller may be asked to sign a promissory note or even bring funds to closing. Each case is different.

10. This market is tough and many sellers are faced with tough choices. The short sales is not a short process. We hope this information is helpful to you.

Click on Short Sale Properties to see homes on our area.

Get more information:

The REALTOR and the Short Sale Process

The Buyers and the Short Sale Process

Please contact us, Marie Avery and Terri Ayers, at 941-358-1818, if you have any questions about our Florida Real Estate market.

About Marie Avery

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