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A Shortsale,
Short Sale or Short Pay is when the lender agrees to accept a
sales price of fair market value for your property despite the loan or
loans totaling more than what the property is worth.
Defaulting on mortgage payments can be a difficult situation. Many
people find themselves falling into default, or are already in default,
and don't realize that there are options available before the bank takes
the house away. A short sale is an excellent way to
avoid foreclosure and can offer time and protection, as long
as it is done properly by a qualified attorney.
In a short sale scenario, the
lender takes a loss on the property and writes off the difference
between what was owed on the property and the final real
estate short sales price. In most cases, the lender takes
less than what is owed on the property to fully satisfy the loan.
Why would a consumer/borrower want to do a Short Sale?
Short Sales are a benefit
to consumers because they stop
mortgage foreclosure and prevent the lender from suing for
deficiency. Deficiency is the difference between what the lender would
have received under the contract and what the property finally sells
for. This shortfall can often be more than $100,000.
By entering into a
voluntary agreement with the lender, you ultimately
stop
foreclosure and your credit report does not merit a
FORECLOSURE entry. This puts you in a much better position to qualify to
buy another property in the future.
Through the negotiation
process, the lender agrees to forego suing you for any monies which they
write off associated with the Short Sale transaction.
A Short Sale transaction
also provides peace of mind and predictability because you know exactly
when the sale will close, and thus when you will need to vacate the
property. There's no worrying that sheriff's deputies will come to your door to evict you.
Why would I hire an attorney or Loan Modification Company to do a Short Sale for me?
Negotiating a Short Sale is
a difficult process, generally because the lender will require certain
documents and information, but too much information or documents in the
wrong format can completely destroy a transaction. Specifically, the
lender will require documents demonstrating the property value, and then
will verify such value with a
broker’s price opinion or “BPO.”
Additionally, the lender
will ask for financial information about the borrower. The borrower must
now convince the bank that he/she is insolvent and simply can not make
the payment going forward. (Think of it as a backwards loan application.)
It is important to give the lender precisely what they want at this
stage without lying (often including bank statements and tax returns),
but also paint a grim picture of the borrowers financial circumstances.
This stage is the most
sensitive because the borrower must prove they do not NOW have the
income to make the payments, but at the same time the borrower must be
careful not to implicate themselves in mortgage fraud from when they
applied for the loan and “proved” to the lender they DID have the income
to make the payments. It is critical to be properly represented through
this process by a qualified Short Sale attorney…for your own protection!
What are the tax implications of a Short Sale?
The tax situations of
individual borrowers are different, but in general, any 1099 income
generated by a Short Sale is usually offset by the loss the borrower
took on a bad investment. Often, critics of
Short Sales look only at the 1099 income without considering
the benefit of the offsetting deduction for the loss on the property.
The bottom line on taxes is
that the tax year in which the borrower completes the Short Sale is a
complicated one, and it is critical to have a Certified Public
Accountant prepare taxes for that year. It is easy to miss the
deduction. Don't let it happen to you. National Loan Auditors is happy
to refer clients to a qualified tax professional who can properly
prepare such returns after a Short Sale.
At National Loan Auditors,
we make the real
estate short sale process as easy as
possible so you can get the relief you need right away! Help is
available in your area. You can also contact National Loan Auditors by
either mail or by phone. We will put you in contact with one of our experienced
Loan Modification or Real Estate attorneys.
Throughout the process, you
will be
treated with respect and understanding.
Every real estate short sales
case is handled in a friendly, supportive manner. We are always willing
to help you and answer questions in plain English. So call us today
at (877) 670-8822 and tell us about your loan
problems. Adjusting mortgage, foreclosure, credit
card debt, protecting assets, etc. We will discuss what might be a
reasonable objective for your situation and why.
Please remember, communication and fast action are the keys to
resolving problems. Burying your head in the sand will NOT make problems
go away. Take action now and give us a call. We are here to help.
National Loan Auditors, Saving Dreams
One Home at a Time!
Order your Forensic Loan Audit Now!
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