Basically, a short sale is one in which there is more debt owing on the property than the property's value - termed "underwater" in many markets. In countless cities across the country, short sales and distressed property or bank-owned homes account for more than 40% of all real estate sales.
Who is involved in a short sale? First, the homeowner(s). Second the lender (mortgage company or companies). The sellers will have to explain their financial situation to the lender and convince them of their inability to pay the full balance owing on their home loan. The lender will require documentation of the seller's finances.
The lender wants a) to the paid the full amount of the loan, b) if that seems impossible, to minimize their loss. A short sale is next-to last resort (last is foreclosure, expensive and tedious for the lender and the worst scenario for the homeowner). Once the foreclosure process has started, it becomes more difficult to work out a possible solution with the lender, because of legal timeframes and filings which must be met. Loan servicers are working on behalf of investors and are expected to negotiate the highest possible sales price for the property, which the lender may feel it can get through the foreclosure auction.
Another player in a short sale is the financial advisor or tax professional. A short sale where a portion of the debt is “forgiven” is considered relief of debt, and may be treated as income for tax purposes. When debt is forgiven, the creditor (homeowner) must submit a Form 1099 to the IRS. For more information, visit http://www.irs.gov/. You may want to discuss with a tax professional future tax liability and consequences of the short sale in your situation.
The 4th player in this scenario is an attorney. You should understand the law related to release of liens, mortgage liability, and future obligations. Some government programs currently offered to homeowners facing foreclosure do not allow the lender to pursue any deficiency balance; however, not all homeowners will qualify for these programs.
Finally, and not the least important, the 5th player is your REALTOR®. I am experienced in short sales with both buyers and sellers in all counties of central New Jersey, from Hamilton to the Shore. So call or email me and let's discuss your options, the value of your home, and your future needs. Should it be necessary for you to proceed with a short sale, the lender will require the property to be listed with a licensed REALTOR®.
If you are having problems paying your mortgage, don't wait. A Short Sale is your best alternative to foreclosure.
Joe Giancarli, SA
Real Estate Advisor
Short Sale Specialist
609-658-2612
jgiancarli@remax.net
http://www.joegiancarli.com/
http://www.njhomesource.com/
http://www.newjerseynewhomes.blogspot.com/
www.activerain.com/blogs/josephgiancarli
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