February 1, 2010

By  Nancy Braun

A short sale may be your best alternative if you have financial trouble and a house that will not sell for enough money to pay off all the debts associated with the home. It is not for everyone. It is not for people who do not have a financial crisis, because they will not qualify with their lender. Lenders will not let you fail to pay back a loan just because you do not feel like it, it has to be impossible for you to pay it back.

Realtors used to say they could not help homeowners who were “underwater” where their home would not bring enough to pay off the liens and the homeowner did not have the money to pay the balance. Short Sales are a tool just for this situation. Price the house so that it will sell, and negotiate with the lender to pay everything possible on the loan.

You need to evaluate the alternatives. You can let the bank foreclose. But, that has worse effects on your credit and the image of the sherrif evicting you from your house may be something you do not want your children and neighbors to see. If you have only one lien (only one loan and no other secured debts), you might consider giving the bank a deed in lieu of foreclosure. That may work for some people, particularly if you negotiate a full release form the rest of the debt. However, it has worse consequences on your credit. You can try a loan modification. With the new legislation and regulations, there may be a way where you can get your payments in line with what you can afford so that you can keep the home.

A short sale is not an easy process. You have to get the buyers to be patient, as the lenders may take a while to review the offer. You need to realize that you might pay income tax on the amount you do not pay back, as discussed in a complete post on this site about tax consequences. You may qualify to pay no income tax if it is your primary residence being sold and you meet other requirements. You need to look into whether the bank will accept the payoff in full settlement of the debt, or whether they are going to chase you for the balance owed after the sale closes.

Some people will tell you that you have to be behind in your payments to do a short sale. That is not true, although some banks have some odd rules.

Some people will tell you that you cannot do a short sale on an investment property. That is not true, but you stil have to show financial hardship.

One oddity of this process is the real negotiation is done with the bank and lien holders. Normal negotiations in real estate sales are between the buyer and the sller. But, if you are not paying income tax on the amount you are not paying back to the bank, you may not care what the house sells for. Also, a lower price will make it sell quicker and elmininate your pain faster. However, the bank will only accept a sale that is close to market value, so you have to price the home well. Just like Goldilocks, the price cannot be too high so that the house does not sell and it cannot be too low so that the bank does not approve the sale. Pricing has to be just right.

If you have a Realtor who sent you to this website, you have found someone schooled in short sales, so read what you need here and listen to their counsel. If you do not have a Realtor to quide you through this complicated process, contact us using the form below, because our mission is to get more short sales done by properly trained Realtors throughout America so we can get out of this financial crisis.

If you would like to sell your house in the Char/Meck area of North Carolina, or be referred to a short sale expert anywhere in America, use this form. It is secure and we keep your information confidential.

Nancy Braun

Call me, Nancy Braun, at (704) 997-3794. Let’s talk about your needs and wants in a home.

Nancy Braun

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