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Jeff McIlhenny Beacon Brokers Realty
Cell: 843-452-2953
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Charleston SC Bank Short Sale Help |
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SHORT SALE HELP FOR CHARLESTON, SC HOME SELLERS
What Is A Short Sale?
A Short Sale is basically a step before foreclosure. Foreclosure is the worst option a homeowner can have. Foreclosure is usually the last step, although too many homeowners in bad situations do not realize that they have many options before foreclosure.
Foreclosure can devastate your credit, and it will be several before you will be able to purchase another house--a foreclosure stays on your credit for up to 10 years and is a huge red flag to lenders. Even if you do not intend to purchase another house, the negative impact on your credit can detrimentally affect your ability to qualify for other loans, credit cards, insurance, employment, and rentals.
In a Short Sale, the bank agrees to allow the homeowner that is heading towards foreclosure to sell their house for less than what is owed. For example, say a home owner owes $185,000 on their mortgage, but their house is only worth $175,000. The bank agrees to accept $175,000 as a payoff. It is important to note that the bank determines if they will allow the sale.
Why Would A Bank Agree To Take Less?
Banks agree to do Short Sales to avoid the foreclosure process. Foreclosure costs the bank in legal fees, court fees, and then fees for marketing the home to sell it. A bad loan also prevents banks from loaning money--they are in the business of loaning money, not owning real estate. In short, selling the home short before it goes to foreclosure costs the bank much less.
Advantages Of A Short Sale
The advantages for the homeowner is that they avoid foreclosure, the worst case scenario. Their credit isn't as negatively impacted as it would be with a foreclosure.
Disadvantages Of A Short Sale
Most lenders will not consider a short sale unless the homeowner has missed some mortgage payments. This will hurt your credit scores greatly. The short sale itself isn't the only damage to your credit--the missed mortgage payments also combine as a double whammy.
Also, just because the lender agrees to take less than they are owed does not mean you are off scott free. They will issue either a Deficiency Judgement against you, or file a 1099 with the IRS for the amount shorted--the IRS will treat this as income. Sometimes lenders have been known to do both.
A Deficiency Judgement is a judgement against you for the amount shorted--in the example above, they would have a judgement against you in the amount of $10,000. This judgement would show on your credit report, and also could affect your credit detrimentally.
The 1099 to the IRS would be treated as income, and would be included in your tax returns the following year.
However, there are possible ways out of these. First, it is important that when submitting a short sale to the lender that you always ask for them to forgive the remaining balance--this is called a "Deficiency Waiver". You may not get one, but you will certainly not get one if you do not ask for it!
Second, you can ask your accountant for a tax form that will seek to waive any 1099 income from a short sale.
Finally, recent acts of Congress, such as the Homeowners Relief, have pretty much allowed for owners of Primary Residences to have their deficiencies forgiven. With so many homes that have been sold short or foreclosed upon in the last couple years, it is more common for homeowners to avoid Deficiency Judgements or IRS 1099s--however, it is still important to know that they are possibilities.
What Do Lenders Require For Short Sale?
All lenders are different, and have differing sets of criteria. However, there are some basic elements that they look for in a Short Sale: the homeowner must be behind in payments (in rare cases they will allow a short sale for a homeowner that is current), must show some form of hardship (job loss, illness, etc.), have had the house listed for sale, and they also require an offer on the house.
What Should I Do If I Am Struggling To Make My Mortgage Payments?
First step, you should always try to contact your lender! Often, they will be willing to work out some sort of solution for you--some type of mortgage modification or refinance. Remember, banks DO NOT WANT TO OWN HOUSES!
The next option is to contact professionals that can help get you out of this situation, offer you options and solutions, and can help take the burden off of you.
You need to be careful when selecting a Real Estate Agent to work with--you need someone that is familiar with short sales and has resources that can benefit you. You do not want any real estate agent, especially one that does not know how to handle a short sale.
Most importantly, you do not want to attempt a short sale on your own. The process is far too complex and time consuming, especially for someone that doesn't know what they are doing. It is very important to understand that when you are in a distressed situation and heading towards foreclosure, TIME IS NOT ON YOUR SIDE! You must move quickly, because the longer you delay, the fewer options you will have and the more likely you will wind up in foreclosure!
HOW WE CAN HELP:
We can offer help in two ways. Our team includes an experienced Short Sale agent that has negotiated many Short Sales. We also work with a professional Loss Mitigation Company, Homeowners Advocate. They are Professional Short Sale Negotiators, and that is all they do. Plus, they get paid through the transaction, which means no upfront fees or charges to you!
Be sure to check out our "Sellers's Page" for more information on what we can do as far as marketing your home. We will be happy to discuss with you in greater detail your unique situation, and help determine if a short sale is your best option. Contact us today to get started!
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This is not intended to be legal advice! Always consult with
your attorney and accountant before making final decisions.
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Last Updated ( Sunday, 01 August 2010 )
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