Having a Realtor can
bring some stability into a Short Sale transaction, but everyone needs to
realize that a short sale’s success depends on a variety of issues. This
type of transaction is constantly evolving; however there are a few things that
remain the same and any Seller considering a Short Sale will need to
understand.
Market Value Matters
Short sales sell for
market value. You heard this
correctly! A bank will generally agree to a short sale if the numbers
make sense. Banks realize that homes need to appraise and Banks also need
to mitigate their loss. Therefore, having a home listed for well
below market value is not the best strategy for getting an approved short sale.
It's true you may get plenty of offers, but if the bank won’t accept any
of them you end up having wasted a lot of energy, face disappointment and
several angry potential buyers.
Banks are no longer in
the business of giving away houses. The banks need numbers that make
sense. So when the figures make sense, the likelihood of a successful
short sale closing is 90%.
Only Real Hardships Get the Help
I’ve heard of many
potential sellers say the only reason they are pursuing a short sale is because
everyone else is doing it. Purchasing a house during the housing boom is
not a legitimate hardship. If you purchased a house during that time
period and now you are unable to pay your mortgage - that is a hardship.
Strategic default is
never a good idea! Banks actually analyze short sale sellers’ hardships, and
most center on the economy, so the bank is going to make sure that a short sale
is in their own best interest. Acceptable hardships include medical
issues, divorce, disability, significant loss of income, death, unemployment,
and relocation.
Short Sale Laws are Local to Your State
There are currently no
national short sale laws on the books. There are federal guidelines, but
they can be applied when and how a bank wants.
In the Short Sales I have done in my
state, when the short sales are completed the deficiency amounts were
forgiven for homes which were the primary residence of the Sellers.
But this may not be the case in all states, or when the home was not owned for the purpose of the
primary residence.
States can either have
recourse loans or non-recourse loans. A recourse loan allows the bank to
demand a borrower pay the difference between what the property is sold for and
what is owed on the lien. Many recourse states allow lien holders (banks)
to pursue judgment liens against the borrower for the deficiency amount.
This process allows the bank to garnish a borrower’s wages until the debt is
paid off. Garnishments can be as much as 25% of non-exempt disposable
earnings, and bankruptcy doesn’t always save a defaulted borrower from judgment
liens.
Remember - Your Real Estate agents is not allowed to practice law, unless they are actually licensed
to do so. However, Realtors are required to be aware of possible
penalties for short selling a home and also be able to direct their clients to
the right resources to discuss the possible consequences and solutions.
So it is important to consult with your Realtor and your CPA.
Short sales can be
complicated to navigate, so don't try to do it alone. But for those of
you who qualify and require some much-needed relief, remember, it is important
to have an experienced Realtor to help you.
Note: This article also includes information summarized from the Trulia website provided as a
service to Realtors.
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