REAL ESTATE SHORT SALE TIPS

What is a Short Sale?

Simply put, a short sale is a real estate sale in which the proceeds from the sale fall short of the balance owed on the loan secured by the property. A seller facing foreclosure works with their lender to accept less than they owe on the property.

Some Important Short Sale Tips

Contact Your Lender
You may need to make a few phone calls before you find the person responsible for handling short sales. Ideally, you want to go beyond the "work out" department and get a supervisor, someone authorized and capable of making a decision.

Prepare Your Documentation
You'll need to prove that you can't pay what's owed on your mortgage. Bring supporting documentation to your lender, including:

• A Current Appraisal of Your Property
• Proof of Income and Assets
• Copies of Bank Statements
• A Letter Explaining Your Financial Hardship
• Recent Comparable Sales Data for Homes in your Neighborhood

Understand Your Position and Your Lender’s Position
If you have a strong enough argument, the lender may agree to allow you to do a short sale, and then forgive the rest of your obligations. Remember, foreclosures are bad news for lenders. When a foreclosure happens, the lender must step in and become a temporary landlord, property manager, and real estate marketer. Meanwhile, the money tied up in the home cannot be loaned to another bank or mortgage company customer. As a result, lenders are usually just as motivated as homeowners to avoid foreclosure. As a seller, you need to know that a short sale may damage your credit, though probably not as much as a foreclosure. Also, lenders generally will only agree to a short sale if the seller is behind in payments and has received a default notice.

Be Aware of Legal and Tax Consequences of a Short Sale
You may still be subject to judgments and taxes. Even if you do a short sale, the lender may still sue you for outstanding balances owed, so try to negotiate the terms of debt forgiveness in writing with the help of a qualified real estate attorney. The IRS currently views forgiven debt as ordinary taxable income, so you'll be required to pay taxes on the amount of debt that the lender wipes off your account. That could add up to a substantial and unexpected expense at tax time.

Save Your Credit Score
Saving your credit score is more important than you may think. Credit scores have far-reaching implications you may not even be aware of, because lots of people aside from bankers study them. More than 30 percent of employers check the credit results of applicants when reviewing new employee applications, according to the Society for Human Resource Management, and cell phone service providers often check credit before accepting new customers. Most of the major auto insurance companies also use credit scores to calculate rates, and may charge considerably more if you have bad credit.

Is a Short Sale the best option?

A short sale may be right for you in your situation, but as with all important decisions, you should think it through and examine all your options.