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When families find themselves staring at the prospect of losing their home to whatever reason, whether job loss, downsizing, relocation or anything else that is unforeseen – many times they feel cornered and unable to see the options. For years during the current economic state that has resulted in an unstable real estate market, the answer seemed to be foreclosures. But more and more often, short sales are taking over as the alternate choice.
Here are three things worth knowing about short sales:
It Doesn’t Hurt to Ask For An Adjustment
Many people do not realize the benefits of simply engaging in dialogue with their banks. With the large number of distress sales out there these days, banks are far more willing to engage in conversations about alternatives to foreclosure. Foreclosures end up costing lending institutions thousands of dollars to litigate, plus hours of time and resource put in to handle each case. By expressing the desire to explore a loan modification, banks are relieved of this stress and are likely to agree with a loan modification.
Through an adjustment of your current interest rate, you may be able to afford the same home and spare you and your family the difficult process and impending negative impact of a foreclosure. Not only does a loan modification save homeowners money, it also protects their credit from long-term negative affects otherwise experienced with foreclosures.
Know What The Tax Man (Or Woman) Has To Say
Short sales are a great way to spare a family of much pain but there are tax implications. Like anything else, before embarking on this financial shift with the ownership of your home, it is a good idea to familiarize yourself with everything you need to know about the taxes involved. In short, the tax liability works like this: On a mortgage with $200,000 owed that has a short sale of $100,000, there is that remaining $100,000 left that will show up on a 1099 in your name. This translates to income and should be managed with a tax advisor so you understand all there is to know about that real estate income.
All Players Must Agree to the Terms
A lot of times mortgages involve multiple lenders. When those homes are being purchased, surely the thought of needing to do a short sale was not a consideration. Now that you do find yourself looking at a short sale, it is essential to iron out the terms of agreement with all lenders involved.
When there is more than one lender the secondary bank must agree to give the primary lender a portion of the liability on the difference to you. This sounds easy enough but since this can be a matter of lender-specific policy, you may come across a lender that is unwilling to agree to this term of a short sale. By researching in advance the number of banks that are involved and what their respective policies are regarding short sales, you will cover important bases and be far more prepared.
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Short sales are a choice that offers many families reason to hope and a path to dream the reality of living in their own home again, without struggling to manage the mortgage. Armed with the key knowledge necessary to tackle this newest intervention on the real estate woes of many, you can and will hope to succeed in your housing endeavor and look forward to a positive outlook!
