Home Selling in Southport>Question Details

Jeff Townsend, Home Seller in Charlotte, NC

I don't know enough about short sales to make a good decision.

Asked by Jeff Townsend, Charlotte, NC Tue Feb 8, 2011

I purchased a second home in 2005 with the hope that it would continue to increase in value and I'd be able to flip it in two to three years. Needless to say, I'm probably upside down in the property. I've had it listed several times but each time I've listed it for more than my mortgage amount. Just recently an agent, who inquired about my property once the last listing ended, suggested I short sale the property. I've heard so much talk about short sales and really don't know what they are or how it will affect me. I don't want to do anything that will ruin my credit or leave me with a judgment against me.

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This is a great question. Short sale means you sell your property for a value less than what is owed. The process is actually very easy with the right team working for you. Initially, you'll list the property for the value your REALTOR® suggest and openly advertise it as a short sale (if the listed price is less than your mortgage amount). Once you have an offer on the table you are able to negotiate with the buyer to come to a mutually acceptable amount and then the offer is submitted to your mortgage institution. At this time, it is strongly recommend that you have an attorney, who specializes in short sales, represent you. This attorney will negotiate with the bank on your behalf for an outcome that is best for you. The mortgage institution will most likely have an appraisal and BPO(Broker Price Opinion) done to determine fair market value. This will help them to determine if a short sale is the best route for them and you. In some cases they will come back to the buyer and try to negotiate a higher price or even ask the seller to bring money to the table to make up the difference between what they want and what the buyer is willing to pay. Once everything is agreed to by all parties you are able to move forward as if it were a standard transaction. After the closing, most mortgage institutions report the short sale to the credit bureau. This will be a one-time (per short sale) hit to your credit and will show as "paid in full for an amount less than what was owed." This is most often the better "credit preservation" method over deed in lieu or foreclosure. The sellers mortgage institution will, in most cases, forgive the deficiency and send the seller a 1099 at the end of the calendar year for the deficiency amount. Institutions such as First Citizens Bank very rarely, if ever, forgive the deficiency and generally require you pay it back within 36 months or secure it with other assets. I'd recommend that before you begin the short sale process you talk with your REALTOR®, CPA, and attorney to discuss how the short sale process will affect you.

If you have any additional questions please do not hesitate to contact me.
1 vote Thank Flag Link Tue Feb 8, 2011
First, to get the bank to allow a short sale (a sale that is for less than it takes to pay off the mortgage fully) you have to be behind on payments and have a hardship, like loss of job, moving, medical. Without those your bank is happy so they are not going to allow you to sell at a loss for them. In some states a bank can still come after you for the difference in what you owe minus the sale amount, so you might not be able to totally walk away free and clean. Your first step will be to talk to your bank and see if they will allow a short sale. You might ask them about a mortg modification to help you out.
1 vote Thank Flag Link Tue Feb 8, 2011
Hi Jeff
The short sales process varies by situation but you will most likely have a negative impact on your credit and could also end up with a judgement. You might consider renting the property out until the market recovers.Pricing is ke yin todays market as you compete with many distressed properties so unless you are readfy to let it go at today's competitive pricing, you may be better holding on longer term. I would be happy to discuss your specific situation and help identify the best strategy going forward for you.
John Kilian
910-880-2087
0 votes Thank Flag Link Thu Apr 12, 2012
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