In today?s tough economy, short sales have become more frequent. Often, homeowners find their properties are underwater. This means that homeowners owe more on their mortgage than their property is worth. in these cases, short sales can provide a way out for both borrowers and lenders. Homeowners may be wondering what is a short sale in real estate.
When a property is sold for less than the remaining mortgage balance, that is called a short sale. Lenders decide that foreclosure proceedings are more expensive than selling at a loss. they then discount the mortgage balance and sell the property. the forgiven amount is not taxable for some homeowners.
Lenders may or may not wait until a borrower defaults. in addition, other lien holders may oppose the transaction. A lien holder could be a municipality with a tax lien against the house. it could also be a provider of a home equity line of credit. in the worst cases, lenders and lien holders might require repayment of outstanding balances. the laws for deficiency judgments vary state-to-state.
Borrowers benefit from the transaction as well. it shows up as a settlement, instead of as a foreclosure, on the credit report. This settlement may remain on the report for seven to ten years. however, the borrower may be able to get a loan within two years. he or she may be able to take out another mortgage within seven years.
The homeowner initiates the transaction by calling the lender. the entity to contact is the bank?s loss mitigation department. Getting a person with the authority to make decisions may take several attempts. Remember that a bank will not provide information to an attorney or a realtor without receiving a letter of authorization.
Banks will also want to see a letter of hardship. Homeowners should be brutally honest when composing the letter. they should list out job losses, medical bills, and other difficulties. Banks will understand legitimate challenges. they will not understand either dishonesty or any criminal activity.
Borrowers are wise to seek professional representation. they should seek a realtor who is short-sale certified. they may also need the services of a lawyer and a title company. A professional will make sure that the sale closes in time to avoid foreclosure. in these transactions, the lender pays the realtor?s commission.
Buyers should take great care when purchasing one of these homes. they should always retain a real estate attorney. they should also talk to an accountant to understand the tax consequences of the purchase. in addition, they must hire a home inspector. These properties usually come as-is, so the buyer needs to know everything about the home?s condition. Finally, a buyer should never turn over cash to any seller. Such transactions are usually fraudulent.
The real estate market today is tough for everyone. however, it is best for homeowners, lenders, and communities when foreclosure is avoided. for this reason, homeowners in trouble must know what is a short sale in real estate. it could be the best way out for all parties.
What is a short sale in real estate? find out now in our comprehensive guide to short sales and foreclosures on ebenezerrealestate.com
Tags: borrower defaults, borrowers, credit report
Source: http://foreclosuresnews.com/a-guide-to-real-estate-short-sale-transactions/
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