Short Sales Tips for Sellers

If you're thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won't cover your total mortgage obligation and closing costs, and you don't have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.

The following conditions qualify a seller for a Short Sale:
.Your property is worth less than the total mortgage you owe on it.
.You have a financial hardship, such as a job loss or major medical bills.
.You have contacted your lender and it is willing to entertain a short sale.

Although a refinancing programs may be available, banks are too busy and may not offer a proper payment method that is convenient to the seller's particular situation. It may turned out to be a stalling process to an inevitably Short Sale.

The first step to a short sale is to hire a qualified real estate professional and a real estate attorney who specialize in short sales. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have closed short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process.

Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer typically must include:

A hardship letter detailing your financial situation and why you need the short sale
1)A copy of the purchase contract and listing agreement
2)Proof of your income and assets
3)Copies of your federal income tax returns for the past two years

Prepare buyers for a lengthy waiting period. Even if you're well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months.

You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale.
Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
Having a portion of your debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit less than foreclosure and bankruptcy. Source from OFFICIAL MAGAZINE OF THE NATIONAL ASSOCIATION OF REALTORS®
September 6,2010

Banks Start to Embrace Short Sales

Banks Start to Embrace Short Sales Even before the government put pressure on them to embrace short sales, more banks were starting to take their lumps, do the short-sale deals and move on.Three years into the housing meltdown, short sales have tripled to 40,000 in the first six months of 2009, compared to the same time period a year ago, according to data from the Office of Thrift Supervision and the Office of the Comptroller of the Currency.
Wells Fargo, Bank of America Corp., and JPMorgan Chase & Co. this year have hired and trained more staff to handle short sales and also developed software for expediting them. “It’s really finally dawning on banks that they’re better off with a short sale,” said Richard Green, director of the Lusk Center for Real Estate at the University of Southern California in Los Angeles. “I think banks were in denial.”
Source: Bloomberg, John Gittelsohn and Margaret Collins (12/4/2009)