Short Sales – A Step By Step Process
February 25th, 2008 Categories: Foreclosures & Short Sales
A short sale in real estate occurs when the outstanding obligations (loans) against a property are greater than what the property can be sold for. If you’re facing a short sale or foreclosure situation, read the following and call or e-mail us for more assistance.
Step 1:
Verify the value of your property. If you are selling the property through a real estate broker, your broker will provide you with an estimate of market value. If you are selling the property yourself, do your own market analysis of the area and your property.
Step 2:
Add up all the costs of selling the property. If you are using the services of a real estate broker, the broker will provide an estimate of closing costs. If you are selling the property on your own (for sale by owner), call a local title company or real estate attorney and ask, as a seller, what the closing costs will be.
Step 3:
Determine the amount owed against the property. This will be the total of all loans against the property.
Step 4:
Do the calculations. Subtract the total amount owing against the property from the estimated proceeds of the sale. On a short sale, this will be a negative number.
Step 5:
Contact the lender or lenders. Talk to someone in the customer service department and tell them the situation. They may direct you to a specific department. Talk to a supervisor or manager if possible; this person will have more authority.
Step 6:
Ask the lender what its procedures are for a short sale. Some lenders are willing to work with you by reducing the amount owed or making other arrangements. Others will look to the agents involved (if any) or anyone else who’s making money off the transaction to see if they are willing to make concessions to make the transaction happen. Still other lenders will tell you that your debt is your responsibility, one way or the other.
Step 7:
Sell the property.
Debt Relief
Here is a link t othe IRS website that has a pretty good explanation fo the tax consequences of a foreclosure. This would apply to a short sale too. http://www.irs.gov/newsroom/article/0,,id=174034,00.html
We would like to emphasize that in California there is usually no “cancellation of debt income” from a foreclosure with respect to a mortgage held by a bank or financial institution because these loans are “non-recourse”.
The same might not be true if debt is from a private lender. Cancellation of debt income is the excess of the loan amount over what the lender sold the house for. This is ordinary income, not capital gain and is not reduced by the $250K or $500K exclusion for gain on sale of residence. Not good stuff here….
If the amount of the loan forgiven exceeds the cost of the house, the difference is treated as gain from the sale of a residence. If the 2 our of 5 year rule is met, you can use the $250K or $500K exclusion.
For additional information or if you are facing a possible short sale or foreclosure, please don’t hesitate to call or e-mail us. We’ll send you information free of charge and without obligation.
short sales - a step by step process provided courtesy of ehow.comTags: forclosure information, Forclosures, Short Sale help, short sale information, Short Sales
