The most popular question I hear everyday is, what’s a short sale? The easiest way to explain it is, a seller is selling their home for less than what is owed on the home.
How can they or I do that? The bank or mortgage company needs to approve of the transaction, sometimes stated as 3rd party approval. To get this approval banks go through a lengthy process to approve these transactions sometimes it takes up to 6 months for a bank to sign off on the transaction. They get other real estate agents and appraisers to give them price opinions and they get financial information from the seller to verify their personal situation and credit history.
Does a short sale affect the ability to buy a new home? Yes it does right now if you sell your home on short sale you won’t be able to buy another one for 2 years. If your home is foreclosed on the waiting period is much longer.
Are there any consequences to selling your home on a short sale? There can be. In some states, like Minnesota, they can require you to pay back the amount you still owe the bank after the sale. But it doesn’t happen very often. In the past the IRS could make you pay taxes on the difference, but there is a moratorium on that right now, but some states can still make you pay the tax owed on the difference, they consider the difference as income.
Are there advantages to selling your home on a short sale? Yes there is. First thing is your credit might not be affected. There is a chance that the bank won’t report the debt as having been paid short, they might not report it at all. It also allows people to keep their dignity by selling with the bank’s approval as opposed to letting the home go into foreclosure, none of us had any idea the market was going to sink this low.
I hoped this article helped explain what a short sale is and how it affects the seller. Contact me at 612-267-7093 or by email at rick@rdsoldme.com if I can answer anymore of your questions.
Tags: Appraisers, Banks, Consequences, Credit History, Dignity, Email, Financial Information, Foreclosure, Irs, Moratorium, Mortgage Company, Party Approval, Personal Situation, Real Estate Agents, Rick Davis, Selling Your Home, Short Sale, Twin Cities home for sale, Twin cities real estate, Waiting Period