Some people say “Murphy’s Law never takes a lunch break,” and some people understand that saying oh too well. One day it seems like you are living your life and everything is going well, then out of nowhere issue after an issue arises; lost job, divorce, health issues, etc. With these issues, many will find it challenging to keep up with their day to day bills much less their monthly bills. At times many people panic when they realize that they do not have enough money knowing that their mortgage, car note, and day to day expenses need payment.
A mortgage more than other bills gives you more options to recover when in default. Most states have programs and statutory recovery period to save your home from foreclosure before your lender can foreclose on your home. A short sale is an option that most people prefer more than foreclosure when all else fails.
A short sale in the United States is selling a house at a lower amount than the amount owed on the mortgage, and your mortgage lender approves getting paid less than is owed. The lender bases their approval based on your hardship situation and if there is no possible way for you to repay the amount in default. If the lender determines you have a genuine hardship situation, the lender will allow you to make a quick sale. If the amount of the purchase is less than the amount owed, the lender will write off the loss and may report it to the bureaus as paid in full. You can rebuild your credit quicker with a short sale than with a foreclosure on your credit report. To learn more about dealing with debt and credit, visit http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre24.shtm.
In some cases, a person that did a loan modification and ended up making a short sale anyway was able to get an FHA loan a few years after the Short Sale, provided they got a house of lesser value than the home that was defaulted. A short sale involves coordination and collaboration among several parties such as the Seller, the Buyer, Listing Real Estate Agent, Buyer’s Real Estate Agent, Settlement Agent, Mortgage Lender – Servicer, and or Mortgage Insurer.
It is best to let your listing real estate agent know about all liens and encumbrances that are against your property such as outstanding amounts on the second mortgage, HOA, Condo liens, tax liens or claims for unpaid bills. The agent will then recommend a negotiator to resolve the outstanding issues. In some cases, the first mortgage lender may contribute a determined amount to help affiliate a free and clear title. Time is of the essence in dealing with a mortgage lender to approve a short sale. The quicker you reply to your lender in getting the information they need to make a decision, the higher the possibility of approval.
During the time of the short sale, you should upkeep the property because the quicker and the best price the property can sell for the better it is for your bottom-line. Until the property sells, you will still be liable for all expenditures of your property, including utilities, assessments, association dues, and costs for interior and exterior care. Cooperating with your real estate agent to show the property to potential buyers will help to sell the property quickly so you won’t incur more liability due delayed time. It is always best to contact a tax professional to discuss what impact if any a short sale will have on federal, state, or local tax.