Real Estate Short Sale
Do you owe more than your home is currently worth and you need to sell your home? If so a real estate short sale may be the service you need.
What is Short Sale?
A real estate short sale is when you owe more than your properties currently value but you need to sell. In a typical situation, your mortgage lenders would require you to come in with the difference in the amount owed. A real estate short sale is where we negotiate with you lenders to accept a pay-off that is less than you currently owe and you do not have to pay the difference.
What is Required for a Real Estate Short Sale?
In order for us to get a real estate short sale accepted for you, we first must list your home for sale. During the listing period, you will need to provide the following documents to us so that we may package a real estate short sale request to your existing mortgage lenders.
Documents required for Real Estate Short Sale
Please gather the following:
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Last two years tax returns with W-2's and any tax schedules
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Most recent two months of paystubs
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Most recent two months of bank statements for all your accounts, including retirement accounts, 401k.
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Current mortgage payment coupons for existing mortgages
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Copy of original mortgage note and deed of trust
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With these documents we create a package as to why you require a real estate short sale and submit this to the appropriate department at your lender, once we have an accepted purchase offer for your home.
Who can Qualify for a Real Estate Short Sale?
Typically, the mortgage lenders will only accept a real estate short sale if you are at least one month behind on your mortgage payments, have a ready and willing buyer and you are unable to debt service all of your existing liabilities. Also, if you financial situation has changed and you are currently making less money than before and you have no more savings, you most likely qualify for a real estate short sale. This is the reason why we need to above documents to paint a clear financial picture of your current situation.
Frequently Asked Questions Regarding the Short Sale Process:
The California Association of Realtors is clear as to the definition of a Short Sale. Short pay transactions or "short sales" are transactions where the seller owes more on his or her home than the home is worth.
The following Questions and Answers may help you determine what a Short Sale means to you and your situation.
Q. I owe $500,000 on my house which is now worth $350,000. My payment is going up and I can't afford the new payments so I want to move to another area and have to sell my house. Should I short sale it?
A. This is a good example of a short sale opportunity. If you have discussed a Loan Modification with your lender and determined that a Mod is not the right solution for you, then a Short Sale may well be. Just because you may owe more than your house is worth, doesn't mean you have to sell it. As long as you are comfortable and on-time with your mortgage repayment program, you are welcome to stay in your house as long as you like, eventually paying it off and at some point again, enjoying the typical appreciation that goes along with it.
Q. Does the bank sell my house for me in this case?
A. No, you have every right to choose the real estate agent of your choice and have him or her list your house for you at a list price that you establish based on current knowledgeable.
Q. I heard that the I have to pay the bank the difference between what I owe and what it sells for or else the bank will 1099 me for the difference in amounts. Is this true?
A. By definition, A forgiveness or Cancellation of Debt from a lender to borrower can be reported on an IRS form 1099-C. Exceptions are:
- Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
- Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
- Insolvency: If you are insolvent when the debt is knowledgeable, some or all of the canceled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.
- Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your canceled debt is generally not considered taxable income.
- Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.
If a short Sale seems to be something you may be interested in..Please feel free to contact us so we may speak with you regarding your options.