Short Sale Questions?
If I chose to short sale my property, would the real estate commission come out of the short sale, or would I have to come up with those funds on top of the mortgage. Do I have to have some sort of financial hardship to apply for a short sale? I really want to move out of state but the house doesnt appraise for what I paid for it. I don’t want to just walk away from the house.
If I chose to short sale my property, would the real estate commission come out of the short sale, or would I have to come up with those funds on top of the mortgage.
“You will have a better chance of a short sale if you can prove to your lender that you have a ready, willing and able purchaser. This means having a real estate agent furnish you with salient advice and contracts and the amount of commission they would charge for the service.”
Do I have to have some sort of financial hardship to apply for a short sale?
‘Usually yes. The lender of course wants to know why you are no longer making regular payments. And still, they may turn down your request for a short sale. You generally have to show first that you couldn’t get the amount of money owed on the open market. Say, you’ve been trying to actively sell your house for 6 months and haven’t located a Buyer willing to purchase at your requested amount. It would have to be borne out by an appraisal to determine the value.”
I really want to move out of state but the house doesnt appraise for what I paid for it. I don’t want to just walk away from the house.
“Depending on who furnished your loan, there could be consequences for selling for less…especially if there were local gov’t funds used. Some people are just walking away, however, you are responsible for the house in case of vandalism, etc. that could occur if you fail to protect it.”
Comment by Landlord — November 10, 2009 @ 10:00 pm
Whoa! Before you even think about trying to get approval for a short sale, there’s a factor you haven’t considered that is probably a deal-killer for you.
The IRS has ruled that in a short sale, the difference between what you owe and what the lender gets from the sale (i.e. the amount you are “short”) is taxable income to you. You borrowed $X and agreed to repay $X + $Y in interest. You spent the $X on the house. If you do not repay $X in full, the amount you don’t repay is taxable income to you. Since you may well get hit with AMT, plan on paying half of the amount you are short to the IRS. So if the short sale is short by $60,000, be prepared to cough up around $30,000 when you file your tax return.
That’s only the federal tax issue. I do not know the situation on each state — each state might not have decided the issue yet.
Is there a situation which is forcing you to sell your home in a short sale? “I wanna move to another state” is no justification for short sale approval. If there is any way at all that you can manage to pay your mortgage as agreed, keep your house. It’s gotta be a better deal than the tax bill, plus moving expenses, plus all of the hassle of selling a house in tough times.
Comment by MissV — November 10, 2009 @ 10:32 pm
You have to be in foreclosure and have no other assets. The commissions come out of the short sale, which may or may not be allowed by your bank.
Comment by iowagal1 — November 10, 2009 @ 10:39 pm
If your bank agrees to a short sale, you then hire an agent to find a buyer for the house, you sell the house for a loss, and with the bank’s blessing, they agree to eat the loss (although they could still demand the homeowner make some kind of payment or share the loss).
The experts say you’ll probably need to find a real estate agent willing to work for a smaller commission (which makes the bank a little more willing to absorb the loss), and you’ll also need to scale back your own spending. Putting expensive jewelry on your credit card will make a bank less inclined to do you any favors on the sale of your home.
And be prepared that if your bank does absorb the loss, the IRS might treat that as taxable income and you’ll have to come up with the cash to cover the taxes.
1. Verify the value of your property. If you are selling the property through a real estate broker, your broker will provide you with an estimate of market value. If you are selling the property yourself, do your own market analysis of the area and your property.
Step2Add up all the costs of selling the property. If you are using the services of a real estate broker, the broker will provide an estimate of closing costs. If you are selling the property on your own (for sale by owner), call a local title company or real estate attorney and ask, as a seller, what the closing costs will be.
Step3Determine the amount owed against the property. This will be the total of all loans against the property.
Step4Do the calculations. Subtract the total amount owing against the property from the estimated proceeds of the sale. On a short sale, this will be a negative number.
Step5Contact the lender or lenders. Talk to someone in the customer service department and tell them the situation. They may direct you to a specific department. Talk to a supervisor or manager if possible; this person will have more authority.
Step6Ask the lender what its procedures are for a short sale. Some lenders are willing to work with you by reducing the amount owed or making other arrangements. Others will look to the agents involved (if any) or anyone else who’s making money off the transaction to see if they are willing to make concessions to make the transaction happen. Still other lenders will tell you that your debt is your responsibility, one way or the other.
Step7Sell the property.
Comment by ibu guru — November 10, 2009 @ 11:14 pm