Is a Short Sale Right for You?

A big topic in today's real estate world is "Short Sales". The short sale is where homeowners looking to sell their home in this slumping market ask lenders to forgive the debt between what they can sell the property for and what they owe. The NAR (National Association of Realtors) estimates that over 40% of all properties being sold today are in a distressed situation -either short sales or foreclosures.

Obviously this is not something lenders are seeking to do or want to do but it's becoming very common as the real estate market continues to show loss of equity. Home buyers looking to snag a bargain may be disappointed, facing months of waiting as sellers and agents negotiate with banks. Some common questions about short sales and foreclosures are listed on this page but feel free to contact me or post here with your own.

Can I do a short sale if I have a second mortgage too?

Short answer is yes, but this is one of the hurdles that make short sales difficult to do and time consuming as they involve negotiations between multiple parties and everybody needs to be in agreement. The lender of the second mortgage often needs to agree to a total loss. When you attempt to do a short sale keep in mind you will need to provide items to support your claim with pay stubs, bank statements and a hardship letter explaining why you can not afford the property.

I found a company on line that claims they will negotiate for me, but I would need to pay them $1,000. Is this a scam?

While there are many companies out there that do this and they may be great I am here to tell you that you do not need a negotiator and some of these firms are questionable at best. Hiring an experienced, knowledgeable short sale Realtor can take the process from start to finish.

What About the taxes on the difference I owe?

The Mortgage Forgiveness Debt Relief Act, allows homeowners to avoid taxes on debt canceled on a primary residence. Taxes would however still be owed if it's a second home or investment property. I would still suggest contacting your tax accountant on this.

The lender says I will still owe the difference, can they do that?

Of course the bank has the right to ask anything they want but that does not mean you need to agree. Consult a Lawyer on your side or speak to a well qualified Realtor to help with this.

What will happen to my credit with a short sale?

Short sales appear on credit reports as a settlement of the debt as opposed to reading "paid in full." The seller will no doubt have a lower credit score due to the process but it will not have the impact a foreclosure or bankruptcy would have on your credit.

If you're in a short sale or foreclosure situation we can help, call The Derrick Monroe Group at (612) 282-7653 or contact me here.