Many consumers who owe more on their home than it is currently worth may be looking for a way out of their failed financial investment. A short sale may be the way to get out from under while helping to ensure that your credit score remains relatively intact. If homeowners are fearful that they are going to become victims of foreclosure, a preforeclosure short sale is a way to take matters into their own hands. A short sale can help ward off the the bank seizing their property in a traditional foreclosure process. The accustomed procedure can damage the homeowners credit for up to ten years!
Homeowners cannot just list their homes as short sales, there are certain steps that must be adhered to. If you are interested in this option, some short sale basics you should know about are:
- Home-sellers must discuss the option of a short sale with their mortgage holder to get the financial institution’s permission
- Home-sellers will be responsible for hiring a real estate agent to find an appropriate buyer
- Typically the real estate agents representing a short sell must reduce their commission in order for the banks to be willing to absorb a loss
- Ultimately, through the short sale procedure, the house will be sold at a loss
- The bank is well aware that there will be some type of loss but may require the home seller to share the financial burden with them
- Consumers entering a short sell must cut down on their spending to make the bank more willing to do you a favor of absorbing the loss
- Even if your bank absorbs the loss, the IRS might treat the sale as taxable income and the home-seller will be responsible for paying off the taxes
- Despite their name of “short sales” they may take several long months to process as the bank has the final word on how much loss they are willing to accept and may hold the offer of one buyer while waiting for a better deal to present itself
Banks are not in the business of handling real estate and are open to other alternatives that will prevent them from becoming property owners. If you feel like the end of your home-ownership may be near, speak with your bank directly about arranging a short sale.