The word ‘short sale’ has become a bit of a buzz-word in the last year or two.   Everyone seems to be talking about it, doing it, or at the very least knowing someone who is going through a short sale.  But, in all of that talk, not everyone understands what a short sale really is (it is NOT a way to save your home, for example), how it works, and how it can affect you.

A short sale is a vehicle that allows you to sell your home in a market where your home is worth less than what you owe on it.  By it’s very definition, a short sale is the sale of real property for less than what you owe on it.  Because the bank(s) holding the mortgage(s) does not get all that they are owed, it has to approve the short sale before it can be finalized. 

A short sale can be the way to go for you, if your home loan is your only source of concern.  It will allow you to get out from under the big mortgage without having to worry about the potential consequences of a foreclosure. 

Most of the legwork in a short sale is done by you, the homeowner, and your realtor. A good realtor is probably the best asset to have in your short sale, and if you are looking for one, Marco | Wimmer PLLC can provide you with several names and numbers of some experienced realtors that may be right for you. 

The realtor will work with you in listing the property and completing the bank’s requirements for a short sale.  Remember, the short sale is a contract between you and the bank, and as such you want to make sure that the contract works for you.  The key component of the contract is whether the bank will consider your debt fully satisfied.  If not, they may try to come after you for the difference between the sales price and the amount owed at a later time.  Based on your individual situation, you may have more leverage in the negotiations than you think.  Finally, keep in mind that in a short sale, the bank typically forgives you a portion of the debt, so they will issue you a 1099(c) for the debt forgiven.  Be sure to talk to an accountant about how that can affect you. 

In conclusion, if your home is the only source of concern for you, and for whatever reason you wish to sell it without waiting for its value to increase, a short sale may be the way to go.  On the other hand, if you are struggling with other bills and cannot make ends meet even without taking into account your mortgage payment, bankruptcy may be the better approach.  Homeownership may affect your eligibility to qualify for one chapter over another, so be sure to talk to an attorney before starting on the path of a short sale.

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