|
|
North Andover, Andover, Methuen, Haverhill and Merrimack Valley MA Real Estate home sale and home buyer representation.
Working together on
your real estate goals.
|
|
Ron Carpenito's
Prime Property Team
powered by:
Keller Williams Realty
168 North Main St
Andover, MA
Mon-Fri 9:30-5:00 EST
Sat-Sun By Appointment
617-797-8710 Mobile
978-475-2111 Office
978-327-5182 Fax
|
|
Short Sales - Know the Risks.
Written by Ron Carpenito
Published 2007 - Lawrence Eagle Tribune
In today's real estate realities consumers and real estate professionals are hearing about and participating in Short Sales more often. But what is this type of home sale process?
A Short Sale in real estate is not the same as a short sale in the financial markets, which is defined as "The sale of a security that one does not own but has borrowed in anticipation of making a profit by paying for it after its price has fallen." A real estate short sale is a lender-approved sale of the property for an amount that is less than owed by the homeowner. The short fall between the sale price and the amount owed is than "forgiven" by the lender.
A Short Sale is typically requested and initiated by a homeowner who is unable to make their mortgage payments for 2 or more periods, and where a loan restructuring is not possible. The lender, although not legally obligated to approve this request, will consider it since they are more interested in devising workable solutions rather going through the expensive and lengthy foreclosure process.
A typical short sale is a process similar to a regular home sale, with a few added steps and a lot more patience and cooperation between the parties. The homeowner should expect to provide proof of their hardship and all the information requested by the lender in the lenders short sale packet. This information will be the basis for the approval or denial of a short sale request. If granted the property is then marketed by a real estate professional, offers are obtained and then submitted to the lender, the offer is negotiated and agreed upon by the lender and buyer, and the deal is then closed.
It's important to understand that in a short sale, it's the lender that accepts, counters or declines the offer from the buyer, not the homeowner. We've seen this step in the process take up to 30 days or more. This makes the process even more difficult given buyer's attitudes and choices in the market today. As these sales become more prevalent I imagine lenders will create special departments to quickly handle these steps so as not to lose deals.
You may be saying that this sounds like a pretty good deal for the struggling homeowner, but there are some issues to be aware of. First, should the lender "forgive" the shortfall amount for the homeowner, a taxable event is likely to occur. Uncle Sam considers the amount forgiven by the lender to be taxable income. Also, not all lenders will forgive the shortfall amount, they may require it to be paid back over time. In the case of multiple mortgages on a property, the secondary lenders may attempt to garnish the homeowners wages as recourse. And there is also an impact to the credit worthiness of the homeowner going forward. A short sale will likely result in a 50 point hit on your credit score and will take at least a year to "work-out". That's a lot more appealing to the minimum 100 point impact on your credit score and 7 year "work-out" most foreclosures creates.
The bottom line is if your having problems making your mortgage payments, contact your real estate consultant and lender sooner than later. Ask to speak with a supervisor in your lenders Loss Mitigation Department to get the process going. Waiting to long will result in more harm than good and fewer options for the homeowner.
Ron Carpenito's Prime Property Team is a full service real estate team serving the Merrimack Valley and New England committed to changing lives one home at a time. Call today to discuss your specific situation and needs.
Data provided by MLS.
|
|
