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The Short Sale – What You Need to Know

short sale, selling your home

The basic definition of a short sale is the selling of a property for less than the amount owed on the mortgage.  This can involve a property that: 1) has a higher mortgage than the market value of the home, 2) has an accepted sales price that would cover the mortgage but not closing costs and/or commissions, or 3) has a second or third mortgage and the selling price will not cover the full balance due.

What You Need to Know

1)    It is up to the bank to decide whether or not to allow a short sale on a property.  However, many banks will approve a short sale in favor of foreclosure, as it earns more money for the bank.

2)    In order to short sale your home, a homeowner usually must have an “underwater” home, a willing buyer and an approval from the bank, as well as a financial or other hardship such as a military move that forces the homeowner out of the house.

3)    If you think you may be in the position to short sale your home, be sure to choose a real estate agent with experience in short sales.  An experienced short sale real estate agent will put the home on the market, negotiate pricing with the bank, and submit all offers of purchase to you, as the homeowner.

4)    There are many legal and tax ramifications with a short sale.  Be sure to consult with your attorney and tax professional before taking any steps.

Short Sale and Bankruptcy

Individuals considering bankruptcy often consider a short sale on their home as well, or in place of the bankruptcy, especially if they are facing foreclosure.  It can be a tough decision whether to short sale the home before or after bankruptcy.

Often, it’s recommended to file for bankruptcy after a short sale.  The short sale will avoid foreclosure and allow a homeowner to actually start fresh with a Chapter 7 bankruptcy, without incurring new debts from continued home ownership. 

Once again, it is always best to consult with an attorney to evaluate each individual situation and determine a course of action.


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