"Should I list my home for a Short Sell with a Realtor?"
It depends entirely on your situation. A lot of investors lost their shirts, their pants, and their skivvies these last few years. Some of them were forced into turning their homes over to the banks so that they could reduce their overhead. Most of them simply short sold the home.
I honestly believe that if you have exhausted everything in our system in trying to work something out with your lender, and you honestly have no other options, then listing your home with a Realtor for a short sale is better than a Foreclosure for the bank.
Professional Short Sale Realtors already know how to work with your bank to list the property. They will give you market research and ideas on what your home is actually worth.
Short selling your home is not a decision you should make lightly. It is often a difficult and long process. If you are successful, the difference between what you sell the house for and what you owe on the house is forgiven. You’ll also avoid a foreclosure on your record.
Know The Tax Implications. KEEP IN MIND with regards to short sale forgiveness of a lien… California Senator Barbara Boxer recently clarified with the IRS that under California law, those who perform a short sale on their primary residence are assured that no federal tax penalties will be incurred even if the Mortgage Debt Relief Act Expires. Technically speaking, as our understanding of such things go, under the anti-deficiency provision of Code of Civ. Proc. §580e, the debt would be a non-recourse obligation, and for federal income tax purposes the homeowner will be considered not having COD income.
| It is also our understanding that the California Franchise Tax Board also states that distressed California homeowners who short sale are protected against any state income tax when the sale of the home is completed. To make absolutely sure it would be prudent to check with your accountant they have all the up to the minute informations on these matters, we can only give you our understanding as we are not legal or tax advisors. |
If you owe less than what you property is actually worth, (a rarity in today’s market) then you can offer up the home in what is known as a Deed in Lieu of Foreclosure without having to list the property at all. The bank simply takes the property back.
So the bottom line is, if you have been current on your mortgage, the question becomes how much is it worth to you to keep your credit intact. AND can you afford the tax consequences of this path? A short sale on your credit is not as bad as a foreclosure and can help keep your credit in a fairly decent state. The lien holder should reflect settled for less than amount on your report. Seconds can go to a charge off status which will reduce your score; you will have to work with them to reverse this on your credit report. Most of the times a Short sale will effect your credit by around 50-100 points when it is reflected on your credit report, and you will most likely have to wait a bit before you can repurchase.
If you decide to take this route we cannot emphasize enough:
FIND AN EXPERIENCED REAL ESTATE AGENT WHO HAS DONE A SHORT SALE BEFORE.
Your real estate agent will be able to deal and negotiate with the mortgage companies on your behalf. An experienced short sale agent will give you a much better chance of successfully short selling your home.
Because there are often so many different entities involved in a mortgage (1st mortgage, 2nd mortgage, the investor on the loan, etc) you really don’t want to do this on your own, with no experience. Plus, you’ll never have any out of pocket expenses to pay an agent, as everything is essentially paid by the lender.
WARNING! Just because an agent says they specialize in “short sales” does not mean they have actually successfully done one! There are many classes agents attend regarding short sales, but nothing compares to real world experience.
Follow Instructions Exactly
An experienced short sale agent will tell you what you need to do to get the house ready to sell.You need a buyer that is willing to stick around for a super long closing or changes to the agreement. In most cases, it takes almost 4 months from when you get the offer to when the closing takes place. Don’t get hung up about the price, all you should care about is getting the place sold.
Prepare to Move Quickly
Because your closing date may not be set in stone, you need to be prepared to leave your home quickly if needed.Prepare Yourself Emotionally
If you are already in default, or have a foreclosure pending, this whole process of trying to short sell your home can be very emotionally draining.You will receive solicitations from everyone and their mother. You may have people stop by your home while you are still there. It can be a very difficult process.
Make sure you have people in your life to talk to about your situation. You will need a support network to help through this time in your life. It will pass. And you are being proactive in seeking a short sale of your home. You are taking the right steps, and in time, everything will work out.
