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 REALTORÂ® 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 REALTORÂ®, 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.