Can you provide any information about a "short sale" of a home?

I don’t know the ins and outs myself but I do know a few people in my area that have gone this route. One never sold, but the other couple had good luck with their short sale. They sold for roughly 30% less than the original price but the bank agrees to accept that as sufficient payment.

If you are facing the loss of your home I would certainly seek some legal advice regarding your options. While the short sale may be a good option, it would simply add insult to injury if it does damage to your credit rating or if there are hidden costs involved.

There are Real Estate investors that specialize in the short sale process and with experience know who to talk to at different lenders. Not all lenders will agree to a short sale.

An investor or investment group will take a look at your home and the area’s market conditions and determine what they can sell the home for and then build in a margin for their profit and approach the lender with an offer. The process takes some time and often the investor will have a buyer ready to go if the lender accepts the offer. On the other hand, let’s say market conditions decline further during the investor/lender negotitation and the investor can’t find a buyer they might back out on you.

Your credit will be damaged for sure because before a lender will even consider a short sale you will have been late on your payments for a long time. However, you may be able to keep a forclosure off your credit report.

Also, seek advice from an accountant as there could be tax liabilities. The IRS may come after you for the short sale difference calling the margin a “gift” from the lender.

Again, seek professional help as some laws could have changed and this is not professional advice from me!!!

The real question is whether your mortgage is a recourse or non-recourse loan. With a recourse loan, the lender can still come after you for the difference if you short sell. With a non-recourse loan, they can’t.

@richmarshall, I believe congress recently passed a law removing any tax liabilities for short selling or foreclosing.

@xyzzy, yeah I thought I had heard that but I couldn’t immediatly find it anywhere.

The Mortgage Forgiveness Debt Relief Act of 2007 by President Bush, amendments made to remove tax liability allow the borrower and lender to work together to find a solution beneficial to both. This protection is limited to primary residences.

Also ehow short-sale

You are best off to just walk away. The impact on credit is the same for foreclosure or short sale, anyone that says otherwise is wrong.

One is best stop paying the mortgage, live there for 1–2 years for free. Banks cannot take all the foreclosures back with out becoming insolvent. I have friends that have not paid a mortgage payment in 18 months, living for free.

The Mortgage Forgiveness Act sunsets in 2009 so do this now not later.

All pending legislation benifits the banks and builders, and nothing is now on the horizion that will benifit homeowners.

Sorry to be gloomy, but this is real.