When housing prices in many parts of the country were booming a concentrate of years ago, there wasn't much national concentration given to short sales. But with the current subprime debacle and addition mortgage delinquencies, many habitancy are wondering if the short sale process is a way to avoid foreclosure.
Basically, the definition of the short sale process is when the lender of a property allows the property to be sold for less than the amount due on the mortgage loan.
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The certain advantage to the short sale process is that it allows the seller to avoid the credit article damage connected with a foreclosure. A foreclosure can stay on your credit article for up to 10 years and can take an emotional and financial toll on you and your family.
But the pitfalls of the short sale process should be thought about as well. The I.R.S. May consider any debt forgiveness as chargeable income, thus resulting in a tax liability. In addition, lenders can often pursue a borrower for the insufficiency equilibrium (the inequity between the amount owed and the amount paid).
In some cases you may be able to avoid taxation if you can prove you are insolvent. But if insolvency is unsuccessful, and you are faced with a tax liability resulting from the insufficiency amount, it may make more financial sense for you to let the lender foreclose.
The Short Sale Process
The short sale process can vary, but it will commonly work as follows:
1) The lender is contacted to discuss the possibility of a short sale and to determine the lender's process for completing the sale.
2) The seller issues a letter authorizing the release of personal facts about the loan and the property to the buyer or escrow agency.
3) The lender will retell a settlement statement, which will indicate the proposed selling price, remaining loan balances and itemize all expenses, including real estate commissions and other fees and expenses connected with the closing.
4) The seller will perfect a "hardship letter," which will information and clarify all financial difficulties. Lenders will commonly want to validate the seller's financial situation by looking at bank statements, venture accounts, along with examining paystubs and other financial records.
5) The lender will then look to the broker to supply a price understanding by examining the condition of the house and the store value of comparable properties.
6) The lender will then want to study the purchase business transaction to determine if all amounts are uncostly and the real estate commission is acceptable.
Because of the documentation required, the short sale process can be lengthy. But if done correctly, it can work well for all parties involved. The lender avoids the uncertainty of the foreclosure process, the seller avoids a foreclosure on his or her credit article (along with possible bankruptcy), and the buyer hopefully got a good deal on a property.
Considering the complexity of the short sale process, you must be educated. If you are considering a short sale, make sure that you discuss your situation with a competent lawyer and accountant. The more educated you are on the process, the easier the transaction will be, and the best the impression you will make on the lender.
The Short Sale Process - comprehension the Short Sale Process