Is a short sale right for you?

August 28, 2008

People who bought when home prices were high may find themselves “upside down” in the current real estate market – they owe more than they can get for their home. Because of this, short sales have been on the rise. 

The term “short sale” means the lender will accept less than the balance owed on the mortgage. For example, if the unpaid balance is $200,000 and the property sells for $180,000, the lender will accept $180,000 as payment in full. 

For a seller who has fallen on hard times and can no longer keep up with mortgage payments, a short sale may be a good alternative to bankruptcy or foreclosure. For the buyer, a short sale may be an opportunity to get a good deal on a home. For the lender, a short sale may save many of the costs associated with a foreclosure, plus the lender doesn’t have to take ownership of the property. 

Sellers need not be in default of their loans to be considered for a short sale. If your unpaid mortgage balance is less than the market value of the home, and you meet other criteria including hardship, the lender may consider a short sale request. 

Short sales are difficult and there are many considerations. Anyone contemplating buying or selling property under these conditions should consult with an attorney and accountant about the ramifications and tax consequences. Sellers should be aware that a short sale may affect their credit rating. They can ask the lender not to report adverse credit to the credit reporting agencies, but the lender is under no obligation to do so. 

Furthermore, many factors can derail the process along the way. And there’s nothing short about short sales; a backlog of requests means it could take months to get an answer from a lender. 

This is one area where you definitely need an experienced Realtor. The Jim Soda Group has been very successful in assisting buyers and sellers through the short sale process. We can refer you to attorneys and accountants and help you determine whether a short sale is right for you. We will walk you through the process, make sure you complete all the required paperwork, and protect your interests. We will follow up in a timely manner to help expedite the process.

With a little patience on everyone’s part, a short sale could be a successful experience and viable solution.

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