Short Sale Properties

What is a Short Sale?

A short sale as defined by Wikipedia “is a sale of real estate in which the proceeds from selling the property will fall short of the balance of debts secured by liens against the property and the property owner cannot afford to repay the liens’ full amounts, whereby the lien holders agree to release their lien on the real estate and accept less than the amount owed on the debt. Any unpaid balance owed to the creditors is known as a deficiency. Short sale agreements do not necessarily release borrowers from their obligations to repay any deficiencies of the loans, unless specifically agreed to between the parties.’

A Short Sale is often used as an alternative to foreclosure because it mitigates additional fees and costs to both the creditor and borrower; however both will often result in a negative credit report against the property owner.

How to Successfully Negotiate a Short Sale?

To maximize the possibility of achieving a successful short sale the owner must employ a Realtor who is experienced with and certified to negotiate with the lending institution or institutions involved.

Edward Kent, Broker Owner of Olde Towne Real Estate holds the Platinum Agent Certification in Short Sales and REO – Bank Owned Properties – through Equator Financial Services, a Nationwide Foreclosed Home Listing Service.

How Long Does the Approval Process Take?

Generally after the buyer and seller agreed to a negotiated price, it will take up to an additional sixty (60) days to get the lenders to either agree, make a counter offer as to the short amount they will accept, or reject the offer altogether.

What are the Benefits to the Seller of a Short Sale?

The short sale enables the Seller to avoid Foreclosure and or Bankruptcy by having the lender accept an amount short of the total indebtedness. The Seller is able to negotiate a release of the mortgage balance owed in exchange for the proceeds generated from the Buyer’s offer. Both lender and the homeowner benefit from the short sale process, because the lender avoids the time and expense of Foreclosure, while the homeowner preserves a degree of credit worthiness and avoids a lawsuit from the lender.

What are the Benefits to the Buyer of a Short Sale?

Generally the Buyer purchases the home at a reduced price, as short listings are aggressively priced to sell.

What are the Benefits to the Lender of a Short Sale?

The lender involved in a short sale benefits by eliminating the protracted foreclosure proceedings while at the same time minimizing loses on the devalued property in which they hold the financing/mortgage.

What is Often Required from the Seller of a Short Sale Property?

  1. Financial worksheet listing all monthly expenses signed and dated within 60 days of the sale.
  2. A Hardship letter (Why they are unable to pay the mortgage) signed and dated within 60 days of the sale.
  3. A letter authorizing their Realtor access to information on the borrower’s account. The letter must be signed and dated with all the pertinent loan information and the name of the Realtor and real estate company.
  4. Proof of Income and Tax information.
  5. A listing agreement with an Experienced Certified Realtor

What are the Tax implications of a Short Sale?

The seller should consult their accountant or legal advisor. IRS Publication 4681 details the implications of a Short Sale and Foreclosure. Consult with a Knowledgeable Certified Realtor for more details.