If you are curious about the term and do not really know what it means, that does not involve rocket science, so no complicated things to understand. A short sale occurs when a borrower often due to economic or financial difficulties can not fulfill his / her loan obligations to the bank. The borrower generally has fallen behind on mortgage payments and possibly could be facing foreclosure. Therefore, both the lender and borrower agree that it would be better to sell the property for less than what is owed on the loan rather than go through foreclosure proceedings. Currently, the bank loses less through a short sale foreclosure, so that in no way is by making the borrower a favor. This is a business decision that allows both parties to spend less than otherwise. The borrower has less than a coup in his / credit history, although the information is maintained in the credit report for seven years thereafter, as well as any other entry will remain, except for bankruptcy.
Banks have suffered unprecedented losses in the current mortgage crisis and now seem more open to discussing a short sale with a borrower who can demonstrate financial or economic difficulties. In the event that there is an agreement, the debtor can sell the house for less than what is owed on the mortgage, and then the proceeds of the sale are delivered to the lender. This is especially important because the real estate crisis in some places has caused the drop in home values to the point where more is owed on the mortgage than the actual value of the home and this makes it much more difficult sell a house to avoid foreclosure. One thing to remember is that the lender has the final say in the selling of a home.
Another thing to remember is that short sales can be quite complex, especially if a second mortgage or third parties involved. It gets even more complicated if there is involved a mortgage insurance because the insurance company will certainly want to be in negotiations because the insurance company is going to have to pay on a claim by the lender to compensate the lender's loss incurring the short sale. The amount that was forgiven by the lender will be reported as income to the IRS and the IRS to tax the amount recorded as income.
The borrower will also be under an obligation to present a large amount of information, including bank statements, a hardship letter, the fair value of the property market, a sales agreement and several other documents that come in a short sale package that the borrower usually receives from the lender
Since there is so much paperwork and there may be multiple parties involved in a relatively complex process, the agreement is not usually close in time to avoid foreclosure. To avoid this, the borrower must include a professional who specializes in this type of real estate process to minimize losses and increase the chances of a successful agreement. After all, the idea of a short sale is to not lose as much as it would if the lender were to foreclose on your property.
Banks have suffered unprecedented losses in the current mortgage crisis and now seem more open to discussing a short sale with a borrower who can demonstrate financial or economic difficulties. In the event that there is an agreement, the debtor can sell the house for less than what is owed on the mortgage, and then the proceeds of the sale are delivered to the lender. This is especially important because the real estate crisis in some places has caused the drop in home values to the point where more is owed on the mortgage than the actual value of the home and this makes it much more difficult sell a house to avoid foreclosure. One thing to remember is that the lender has the final say in the selling of a home.
Another thing to remember is that short sales can be quite complex, especially if a second mortgage or third parties involved. It gets even more complicated if there is involved a mortgage insurance because the insurance company will certainly want to be in negotiations because the insurance company is going to have to pay on a claim by the lender to compensate the lender's loss incurring the short sale. The amount that was forgiven by the lender will be reported as income to the IRS and the IRS to tax the amount recorded as income.
The borrower will also be under an obligation to present a large amount of information, including bank statements, a hardship letter, the fair value of the property market, a sales agreement and several other documents that come in a short sale package that the borrower usually receives from the lender
Since there is so much paperwork and there may be multiple parties involved in a relatively complex process, the agreement is not usually close in time to avoid foreclosure. To avoid this, the borrower must include a professional who specializes in this type of real estate process to minimize losses and increase the chances of a successful agreement. After all, the idea of a short sale is to not lose as much as it would if the lender were to foreclose on your property.
