A short sale only refers to selling real estate for less than is due on the mortgage. This means someone will lose money if the real estate is sold at less than the loan balance. The question you might be asking is, “Who takes the loss?”
Many times a short sale will result in the lender accepting a document called “Deed In Lieu”. This document requires the lender to provide monitary compensation to the borrower, usually in the form of forgiving the remaining balance after the sale referred to as “the deficiency Balance”.
It is best to have a legal representative in such transactions.
Comment by Elliot L — November 12, 2009 @ 10:02 pm
I saw this great article that explains in detail short sales and how to get the best deals here http://www.crystalclearmarket.com/?p=193
The article is well written and simply put. Short sales are tricky business and you need to know what you’re getting into.
Hope this helps. Good luck to you.
Elliot Lau, Realtor of 22 years.
Comment by daril200 — November 12, 2009 @ 10:08 pm
Ideally, if a short sale is successfully negotiated you have no liability after the closing. However, I have seen some short sales where the lender released the lien but wanted repayment of some of the money in an unsecured note. Not ideal, but it beats foreclosure.
The practice of issuing a 1099 for forgiven debt was outlawed in the past 12 months if
1. the home was the primary residence.
2. you lived in it for 2 years.
Short sales are not easy. You need a very good broker and an attorney who is on the ball.
Comment by LarryLJo — November 12, 2009 @ 10:59 pm
PLEASE!! be very VERY careful this is actually NOT true. Upon “successful” mitigation of a Short Sale transaction the debt will have been “forgiven” by the bank, with release of any and all future liens (proper paperwork IS CRUCIAL!!) they will NOT come after you,and you, in essence, will have better future buying power than having a “Foreclosure”. (30 points off your FICO). A Deficiency Judgment is after it has already been foreclosed and the (trustees) sale amount is not enough (deficient) to cover the balance.
However, in a Short Sale the forgiven amount is considered “income” by the Government so you can and most time will be responsible for paying considerable taxes on that amount.(they usually wait a year to assess that amount).
Some Sellers would rather owe the bank than the IRS !! However, I am not recommending that ! I do recommend you consult with a GOOD CPA and find a an EXPERIENCED Broker/Agent .
Comment by J. Philip Real Estate — November 12, 2009 @ 11:50 pm
It depends on who the “you” is in the transaction, but yes it’s possible to make a short sale and be forgiven for any other liabilities. Of course, the bank has to agree to that.
A short sale only refers to selling real estate for less than is due on the mortgage. This means someone will lose money if the real estate is sold at less than the loan balance. The question you might be asking is, “Who takes the loss?”
Many times a short sale will result in the lender accepting a document called “Deed In Lieu”. This document requires the lender to provide monitary compensation to the borrower, usually in the form of forgiving the remaining balance after the sale referred to as “the deficiency Balance”.
It is best to have a legal representative in such transactions.
Comment by Elliot L — November 12, 2009 @ 10:02 pm
I saw this great article that explains in detail short sales and how to get the best deals here http://www.crystalclearmarket.com/?p=193
The article is well written and simply put. Short sales are tricky business and you need to know what you’re getting into.
Hope this helps. Good luck to you.
Elliot Lau, Realtor of 22 years.
Comment by daril200 — November 12, 2009 @ 10:08 pm
Ideally, if a short sale is successfully negotiated you have no liability after the closing. However, I have seen some short sales where the lender released the lien but wanted repayment of some of the money in an unsecured note. Not ideal, but it beats foreclosure.
The practice of issuing a 1099 for forgiven debt was outlawed in the past 12 months if
1. the home was the primary residence.
2. you lived in it for 2 years.
Short sales are not easy. You need a very good broker and an attorney who is on the ball.
Comment by LarryLJo — November 12, 2009 @ 10:59 pm
PLEASE!! be very VERY careful this is actually NOT true. Upon “successful” mitigation of a Short Sale transaction the debt will have been “forgiven” by the bank, with release of any and all future liens (proper paperwork IS CRUCIAL!!) they will NOT come after you,and you, in essence, will have better future buying power than having a “Foreclosure”. (30 points off your FICO). A Deficiency Judgment is after it has already been foreclosed and the (trustees) sale amount is not enough (deficient) to cover the balance.
However, in a Short Sale the forgiven amount is considered “income” by the Government so you can and most time will be responsible for paying considerable taxes on that amount.(they usually wait a year to assess that amount).
Some Sellers would rather owe the bank than the IRS !! However, I am not recommending that ! I do recommend you consult with a GOOD CPA and find a an EXPERIENCED Broker/Agent .
Comment by J. Philip Real Estate — November 12, 2009 @ 11:50 pm
It depends on who the “you” is in the transaction, but yes it’s possible to make a short sale and be forgiven for any other liabilities. Of course, the bank has to agree to that.
Comment by Lori N — November 13, 2009 @ 12:14 am