Short Sales: Are They Worth it?
Short Sales: Are They Worth It?
A short sale is a sale where an underwater seller agrees with the bank to sell the house for whatever they can get with the bank eating the loss.
A Qualified Yes to Short Sales: Are they Worth It?
These sales are better deals for the bank than the use of an outright foreclosure. They save on legal expenses and keep the seller in the house, paying what they can while, hopefully, maintaining some kind of upkeep for the house.
Short Sales: Are They Worth It? Keep in mind…
Certain things should be kept in mind by buyers hoping to take advantage of the fact that these sales typically go for about 10 percent less than fair market value:
- Negotiations will be complicated by the fact that you are dealing with both the seller and the bank. This means extra time.
- There will typically be no contingency on your selling your own property.
- The home will be sold as is, without an inspection contingency.
- If you get a home inspection at your own expense you could lose out if the sale falls through.
- You will need mortgage pre-approval.
- Make sure your deposit, if required, is retractable within 60-90 days.
Seller’s Credit Score and the Short Sale
Technically to the FICO credit scoring agency a short sale and a foreclosure cause the same damage to the credit score. This can be changed by insisting that the bank’s record of the sale not include any mention of the forgiven amount. This must be negotiated right from the beginning to let the bank now just how important it is to you. You are cooperating to make the best of a bad situation. It shouldn’t be too much of a stretch to ask for all legal considerations in this regard.
Warning to sellers: The difference in value that you save by a short sale can be treated as a taxable windfall by the IRS!
Despite my warning in my experience it is rare for the IRS to do this in the average case.
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