SHORT SALES EXPLAINED – OVERVIEW ONLY
Selling your house through a short sale may be a possibility when the net sales proceeds from the sale of your property are less than what is owed on the property. — I would gladly handle a short sale for you under the appropriate circumstances. Or if you are a buyer, the buying end of the short sale transaction.
As a general rule, a short sale may be possible when there has been a change in the seller’s circumstances due to conditions beyond the sellers control. This could be caused by a
- A divorce
- Loss of job
- Or other circumstances adversely affecting the seller’s finances
With the result that the seller no longer can afford to pay the monthly payment(s) on his or her property AND where the seller does not have separate funds to cover the deficiency.
It is important to know that the sale does not take place between the lender and the buyer. The transaction takes place between the buyer and the owner. However the transaction cannot take place without approval from the lender which can cause problems.
The lender will want the the seller to sign a promissory note obligating the seller to pay the deficiency at some future date. The agent representing the seller should seek to insure that this does not happen such that the seller walks away free of future obligations as far as the lender is concerned.
There may also be tax issues resulting from a short sale. Normally debt that is forgiven will count as taxable income to the debtor. However, there is the possibility that part or all of the debt that is forgiven in a Short Sale will not be taxable. To get this issue clarified you need to see your Accountant or Tax Adviser. I am not an investment adviser, a tax accountant or an attorney. The rules regarding debt that is forgiven are much too complex for me to discuss here. Before going forward you need to seek the advice of appropriate expert(s).
If you want to know more, please give me a call! 678-982-3900.