How to Handle Real Estate Short Sale?
A short sale is a sale of a mortgaged property at a price lower than the amount owed to the lender by the borrower. With such a payment the lender releases the lien on the mortgaged property. A short sale is actually a discounted sale. This happens when the lender finds no one to buy the property at a price which will recover the whole balance on the mortgage. You must take some precautions to take care of you interest before deciding to sell a piece of property on short sale.
The property can be put up for short sale under two circumstances. One is when the borrower defaults in mortgage payment. The second is when the owner wants to sell the property even when repayments are current. This happens when the market value of the property goes below the outstanding debt. In both cases you have to negotiate with prospective buyer and arrive at a mutually agreed price.
It is always wise to get the services of a real estate professional who is experienced in short sale to handle the deal.
The next thing you have to do is informing the lender about the proposed deal. The lender has to condone the difference between the money due and the short sale price. Along with the proposal give all the documents necessary to prove that this is the best price that can be obtained in the current market to the lender. The lender must be convinced that it is in their best interest to accept the offer and the borrower will not be able to pay up the debt in its entirety.
Now it is for the lender to decide on the acceptance of the proposal. They have to make due enquiry and confirm that it is best offer they can get. The lender may ask for a proper appraisal of the property. They also have to make sure a short sale is better for them than a foreclosure. Then there may be other creditors with a lien on the property. The lender has to ensure that they also concur with the settlement. The process with the lender takes a considerable time. Normally it takes up to two to four months.
The difference in the short sale price and the actual amount due, known as the deficiency, may be claimed by lender later. Only a lawyer can advise you on whether the loan on the property qualifies for a deficiency judgment. Another important factor is the tax liability. The IRS also may consider adding the deficiency to your income. You have to contact a lawyer to find out your position in this matter.
A short sale is always painful. In addition to loss of face, it may also affect your credit report. During the negotiation you may request the creditor not to report the short sale to the credit reporting agencies. It must be remembered that the lender has no obligation to comply with your request.
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