A short sale is defined as a transaction in which the current market price is below what is owed on the property.
A short sale involves numerous issues as well as financial and legal ramifications.
In some cases, this might not be the best option for the homeowner.
A homeowner who owes in excess of what the home is worth has several options in addition to a short sale.
Different options carry different consequences.
The homeowner needs to be aware of possible deficiency judgments, tax ramifications, and other potential legal actions.
One option a homeowner may have is called a "loan workout".
A loan workout between the homeowner and the lender will allow the homeowner to repay the delinquent payments over a specific period of time.
This could stop the lender from pursing any type of foreclosure action.
Forbearance is also a loan workout where the lender agrees to suspend or reduce the monthly payment for a short period of time.
A loan modification is another alternative to a short sale.
The lender may agree to change the current terms of the original loan.
Changes could include a reduction in monthly payment, a reduction in principal balance or the life of the loan could be extended.
A deed-in-lieu of foreclosure allows the homeowner to "give back" the property to avoid a foreclosure.
This is enticing to the lender since it eliminates the costs involved to process the foreclosure.
A deed-in-lieu may not be available if there is more than one lien recorded against the property.
Foreclosure is sometimes the only alternative for a homeowner.
Some States have anti-deficiency statutes.
If the statutory requirements are met, this limits the lenders ability to pursue the homeowner after the foreclosure sale.
If a short sale ends up being the best decision for the homeowner, hiring a real estate professional with a proven track record in short sale transactions is a smart decision.
This is not the type of transaction you want handled by an inexperienced or part time Realtor.
Legal and tax ramifications are also considerations which must be addressed.
Although the lender may agree to the short sale, they may require the homeowner to continue making payments on the difference owed depending on the type of mortgage.
A short sale may also trigger a taxable event.
Whatever path you take, do your homework.
Interview several realtors, pursue legal advice and talk with a tax accountant.
Taking these steps will assure a smooth process and eliminate any surprises later down the road.
A short sale involves numerous issues as well as financial and legal ramifications.
In some cases, this might not be the best option for the homeowner.
A homeowner who owes in excess of what the home is worth has several options in addition to a short sale.
Different options carry different consequences.
The homeowner needs to be aware of possible deficiency judgments, tax ramifications, and other potential legal actions.
One option a homeowner may have is called a "loan workout".
A loan workout between the homeowner and the lender will allow the homeowner to repay the delinquent payments over a specific period of time.
This could stop the lender from pursing any type of foreclosure action.
Forbearance is also a loan workout where the lender agrees to suspend or reduce the monthly payment for a short period of time.
A loan modification is another alternative to a short sale.
The lender may agree to change the current terms of the original loan.
Changes could include a reduction in monthly payment, a reduction in principal balance or the life of the loan could be extended.
A deed-in-lieu of foreclosure allows the homeowner to "give back" the property to avoid a foreclosure.
This is enticing to the lender since it eliminates the costs involved to process the foreclosure.
A deed-in-lieu may not be available if there is more than one lien recorded against the property.
Foreclosure is sometimes the only alternative for a homeowner.
Some States have anti-deficiency statutes.
If the statutory requirements are met, this limits the lenders ability to pursue the homeowner after the foreclosure sale.
If a short sale ends up being the best decision for the homeowner, hiring a real estate professional with a proven track record in short sale transactions is a smart decision.
This is not the type of transaction you want handled by an inexperienced or part time Realtor.
Legal and tax ramifications are also considerations which must be addressed.
Although the lender may agree to the short sale, they may require the homeowner to continue making payments on the difference owed depending on the type of mortgage.
A short sale may also trigger a taxable event.
Whatever path you take, do your homework.
Interview several realtors, pursue legal advice and talk with a tax accountant.
Taking these steps will assure a smooth process and eliminate any surprises later down the road.
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