What is a Short Sale? This is a common question. A Short Sale of a piece of real estate is where a property is sold for less than what is currently owed against said property. Since 2008, when the real estate market really took a nose dive, homeowners were faced with owning real estate worth less than the amount of the loan(s) owed against the properties. Those very homeowners were falling behind on their mortgages and ending up in foreclosure, or were current with their mortgages, but wanting to sell the property so to walk away and move on. Sound familiar?
There are many reasons why a homeowner may find himself or herself in a position of contemplating a short sale. For whatever the circumstances may be, it is important for said homeowner to understand the process and the financial implications which may follow.
The process typically begins with an understanding of the current fair market value of the property. This is done by having an appraisal done on the property. Once you have this understanding, you then compare it to the total balance owed on the property. If the market value is less than what is currently owed against the property, then you know you are in a position of listing the property as a short sale versus a conventional sale. The property is then listed at an asking price, which typically mirrors the current fair market value of the property. Most people hire a realtor to assist them with the sale of their property, whether it be a short sale or conventional; however this is not required, as a property could be listed for sale by owner.
Once the property is listed as a Short Sale, and a bid is offered, the information is submitted to the bank(s) for approval of the offer. This is where sellers and prospective buyers find themselves playing a part in a waiting game. A Short Sale cannot be forced upon bank(s). They have a review process which can result in a rejection of the offer, and thus terminating the sales contract. If this is the result, there can be another offer submitted by either the same prospective buyer or a new one. Perhaps the new offer will be accepted. Whatever the case may be, the offer ultimately subject to bank(s) approval and this can be a lengthy process.
Conversely, if the bank(s) accept the offer, then the property is scheduled for a closing much like a conventional sale. Upon closing, the property is officially sold. So, what are the possible implications? A homeowner has sold a property and has not satisfied the entire debt liability that he or she originally signed up to. Now what? There are possible implications, all of which should be provided to you in the bank’s approval paperwork prior to closing on the property. This must be read carefully. There are possible credits reporting implications; unsecured deficiency debt implications, or tax implications that are associated with a Short Sale of a property.
Before moving forward with a Short Sale contract, it is important to consult with various professionals associated with this process so you can be knowledgeable of these implications and plan accordingly. Some of the key players would be those involved in the real estate business such as appraisers, realtors, brokers, and real estate attorneys. Additionally, in terms of the debt liability, you should consult with bankruptcy or debt relief attorneys, as well as tax attorneys or specialists.
If you find that any of the above stated situations apply to you, please contact us! The attorneys at Tudhope Law, have a wide range of knowledge as it relates to this matter. We would gladly sit down to consult with you FREE of charge. We will review all creditor paperwork, while also considering the details surrounding your current financial status, and at the same time addressing each of your individual specific goals and needs.