The Short Sale In A Nutshell
Sometimes the owner of a property is no longer able to pay the mortgage or deed of trust. When this happens, foreclosure often follows -or worse: bankruptcy. But there is an alternative, the short sale.
The short sale is the last option taken by the lender. When a lender signs a short sale, they are forgiving a certain amount of debt, and considering the loan paid in full.
That’s right, the lender agrees to accept payment that’s considerably less than the total amount that’s due. Not every bank or lender will accept a short sale -of course it would make much more financial sense to pursue foreclosure and just take the collateral.
To pursue a short sale, consult your real estate attorney if your case is eligible -certain state laws only allow specific values for a loan to qualify for a deficiency judgment in a short sale. Also, consult an accountant, the IRS may consider the unpaid debts as income, affecting your tax records. Also, the borrower is not guaranteed that the lender will not pursue them for the remaining debts beyond the debt already forgiven -an especially good reason to consult your attorney.
Short sales are not just meant for the nonpayer’s but those who have never made a single installment can make a short sale, due to the negative equity that they have for the present. It becomes easy for an individual to short sell the house and get out of the rough financial situation.
Short Sale Strategy Overview
The full process of a short sale will include a contract, an Authorization to Release Information and the addendum. A warranty deed is a tool used in the process. Let’s examine the process now, starting with the contract.
The Contract: This can be laid out in a single page, or even 20 pages -any type of generic sales or purchase contract. Should the price be mentioned, it should be followed by the phrase “see addendum”.
The Addendum
This is the most important piece of paper in your entire manual! Let’s review the Addendum in detail. The first section on the top is just generic information pertinent to the specific property:
Origination of the contract
Date
Names of the parties involved
Address
Tip: It’s best to use both the simple address and the legal address.
Any investor, that is, the lenders, should know that in the foreclosure process, there is the opportunity to acquire bargain property -certainly a valid reason to agree to short sale.
No related posts.