HELP ME? 

I Think I Need to Short Sale My Home. 

 

A short sale in real estate refers to the sale of a property in which the homeowner sells the property for less than what they owe on their mortgage. Essentially, the lender agrees to accept the sale proceeds as full payment, even if they don't cover the entire remaining balance of the loan.

Short sales typically occur when homeowners are financially distressed and unable to keep up with their mortgage payments, but they want to avoid foreclosure. Here’s a breakdown of the key points:

1. Lender's Approval is Required

  • The homeowner must get approval from the lender or mortgage company before proceeding with a short sale. The lender will review the sale offer to see if it meets their requirements and if it will be enough to satisfy the loan (or at least most of it).

2. Process of a Short Sale

  • Seller's Eligibility: The homeowner must demonstrate financial hardship, such as job loss or medical issues, to be eligible for a short sale.
  • Listing the Property: The property is listed for sale, and the homeowner typically works with a real estate agent familiar with short sales.
  • Offer and Negotiation: Once an offer is made on the property, the lender reviews it and either approves or negotiates terms.
  • Approval: If the lender agrees to the sale, it proceeds, and the seller is no longer responsible for the remaining mortgage debt. However, there might still be tax consequences.

3. Impact on Credit

  • A short sale will have a negative impact on the homeowner’s credit score, but generally less severe than a foreclosure. The exact impact can vary depending on the specifics of the situation.

4. Deficiency Judgments

  • In some cases, the lender might pursue a deficiency judgment, which means they could seek the remaining balance that wasn't covered by the sale. However, some states have laws that limit this practice, and in many short sales, the lender agrees to forgive the remaining balance.

5. Tax Implications

  • Homeowners who have a short sale may be subject to taxes on the forgiven debt, though there are exceptions under the Mortgage Forgiveness Debt Relief Act (though this may vary based on your location and specific circumstances).

6. Alternatives to Short Sale

  • Deed in Lieu of Foreclosure: A homeowner voluntarily gives up the property to the lender to avoid foreclosure.
  • Foreclosure: The lender takes back the property through the legal process if no other resolution is found.

A short sale can be a viable solution to avoid foreclosure, but it's essential to fully understand the implications and work with professionals, such as real estate agents and legal or financial advisors, to guide the process.

I personally started doing short sales way back in 2011 when I first got my license in Sacramento, California. They used to take at least 3 to 6 months waiting for approval from the banks. Now, it's not taking as long but you still need to have approval from the bank to sell the property. Comps in the area do not mean anything for the lender. They will set their own price. 

For more information about short sales, please reach out. Nancy Bergman - Salt Lake Home Pros - Fathom Realty

858-617-9449