The Skinny on Short Sales

If you have heard the term “short sale” before, and have been wondering what it means, today’s message is for you.

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Short sales haven’t been common in our market for many years—that is, until now. And since they have come back onto the scene, many people have been asking me to explain what, exactly, a short sale is. Essentially, short sales are a final option for homeowners under threat of foreclosure. A short sale is when the homeowner owes more than the home is worth. Banks are agreeing to release the homeowner from the balance owed and the owner is often released from the debt with no cash out of pocket. Let’s say a homeowner owes $500,000 on a property that is only worth $400,000, leaving them with a $100,000 deficiency. In this circumstance, the homeowner’s bank would search for evidence that hardship caused their inability to pay the loan. In this case, qualifying hardships include death, divorce, illness, or loss of income.

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Short sales are a great way to
avoid foreclosure and get out of debt.

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Assuming the bank finds a reason to forgive the homeowner’s loan, they can then proceed to sell the home via a short sale. Make sure, though, that you receive a Release of Liability document from the bank that proves you have been excused from further payments toward your loan. There are tax ramifications for short sale sellers to consider, as well. From a buyer’s perspective, short sale properties are a great deal—as banks prefer to price such properties below market value to get them off their books as quickly as possible. Before purchasing a short sale, though, be sure to order an inspection. If you have any questions, call or text today at (239) 248-8000. I’d love to hear from you.