Short sale 101: What you need to know
By Connie ThompsonA short sale essentially means the lender is shorted on a mortgage loan. Say your behind on mortgage payments, your mortgage balance is $150,000 and your home is only worth $100,000. In a short sale, the lender agrees to take that $50,000 loss. MultimediaBut just because you want to sell before your home goes to auction does not mean your lender has to go along. "The bank does not have to approve that," said Bellevue real estate broker Sue Brodie. "The bank does take less, and they will have to make that decision. It isn't a decision that the seller or the realtor can make." Before you can do a short sale, your case must qualify as a true hardship -- loss of employment, sudden catastrophic illness, divorce or bankruptcy, to name a few. Simply being overextended in debt probably won't cut it. The lender will require an extensive marketing analysis of comparable home values in the area. Your buyer must be financially qualified and get full disclosure about the short sale process, which typically takes much longer than a traditional closing. What's more, the lender, as well as the seller, must accept the buyer's offer. "Until the bank has approved, it actually is not an approved transaction, period," said Brodie. Short sales are becoming more common because so many people falling behind and owe more on their mortgages than their homes are now worth. And while a short sale will help you avoid foreclosure, it still lowers your credit score by as much as 300 points. If the property involved is not your primary residence, the amount of the forgiven debt could count as taxable income. So again, it's not as easy as it sounds and you need to act as soon as you know you're in trouble before you're in foreclosure. Most experts recommend hiring a experience lawyer or getting the help of a reputable professional who knows the ropes. More information: Most Popular |
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February 3, 2012
- Coos Bay / North Bend, Oregon
