Short Sale Points to Remember

Yesterday, I had an opportunity to attend a great meeting with Michael Davis Esq of Davis Law in Wilmington DE concerning Navigating Short Sales**.

Winter at The Inn at Montchanin Village DelawareWith the current market conditions, we are continuing to see an increase in the number of short sales on the market.  If you are in that position or are considering buying or selling a property that may be a short sale, he noted several important points to consider:

-This is a long process – often 90+ days.  The banks will not be rushed or pressured but will follow their programs at their pace.
-Buyers must have the ability to wait for an undefined time period to obtain approval and settle.
-Sellers must be willing and motivated to supply all required information on a timely basis – this will often include information above and beyond that required to obtain the original loan.
-Sellers should consider paying up front for a title search and obtain independent representation from the beginning to aid throughout the transaction.
-If the property is a qualified principal residence, there is a good probability that debt could be forgiven under the Mortgage Forgiveness Debt Relief Act of 2007 but this is not always the case.
-If the property is investor owned, the 2007 law does not apply and your CPA should be contacted to assess your current position before you decide on a sale.
-The seller and the IRS will receive a 1099 from the sale regardless.
-The buyer and seller have a valid agreement of sale and the short sale is “just another contingency”.

Short sales are a tremendous opportunity to allow owners to move on while creating less damage to their credit than is possible under a foreclosure.  Buyers can also benefit by obtaining a new property at a savings over the full appraised value.  Every transaction is unique, but it is key that all parties have the appropriate expectations regarding timing, requirements, and procedure from the outset of the transaction.

To be sure that you understand and take full benefit of all the options available, I would encourage you to speak with a specialist like Davis Law from the beginning to be sure to avoid potential problems and not to miss any opportunities.

As always, if you have any questions or need any additional information, please do not hesitate to contact me anytime.

(**Note that a “short sale” is the sale of real property by the record owner to the buyer for a dollar amount that is less than the total dollar amount owed by the Owner to the Owner’s secured creditors.  The creditors are not parties to the sale but do possess the Veto power over the sale and the power to renegotiate all terms.)

Advertisements

Tags: , , , ,

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: