Residential Short Sales
What is a short sale and is it for me?
Defining a Short Sale
With the current economic climate and housing market bust many homeowners are wondering if a short sale on their property is a way out of a possible foreclosure. As of May 2009 the latest number of foreclosures in the US has risen to 12%, most of which are taking place in the southwest. These figures are leaving many homeowners to consider the possibility of a short sale on their property. The short sale of a home is possible when the property sells for less than the amount owed on the loan. However, in order to make a short sale possible, the mortgage lender must agree to discount the balance of the home loan due to the financial hardship of the borrower. The negotiation of the new loan balance usually takes place between the borrower and the loan modification or workout department of the bank or lender.
Pros and Cons of a Short Sale
Usually when a homeowner comes to the point of considering a short sale, it is because he has already defaulted on the loan due to the inability to meet the monthly mortgage payments. A short sale can be advantageous to the homeowner and lender alike. The homeowner has a way out from underneath his mortgage obligation without foreclosure or bankruptcy and the lender receives the money loaned on the property except at a reduced rate. Although lenders have agreed to settle for a lesser loan amount, they are able to claim the loss on their taxes and use it as a tax write off. On the downside, the borrower must claim the difference between the original loan and the discounted loan as earned income and be responsible for the taxes owed on the amount. Homeowners should discuss the impact of a short sale with a tax consultant before making a final decision.
Purchasing a Short Sale
Due to the nature of a short sale, the obvious advantage to this kind of purchase is the reduced price of the property. Some buyers may find a 10% price reduction as compared to similar properties in the neighborhood. However, the final sale price of the property will not be left for the owners to decide. The prospective purchaser of a short sale home must have the approval of the current homeowner’s lender in order for the sale to take place.
Find out about Short Sale opportunities in New Jersey
Sean T Shallis and The Shallis Group are considered one of the Nations leading Short Sales experts. Call Sean immediately for a personal and confidential conversation. My direct line is 201-427-1032.