Home owners who find themselves in the position of owing more than their property is worth should consider selling their property through a short sale transaction. While there are a variety of factors that play into a short sale, gaining your lender’s approval to release the property for less than what is owed is the first step.
Understand that even if your lender does consent to a short sale, which does not necessarily mean you are absolved of the entire debt. It’s possible that you can sell the property for a loss, but still owe the unpaid difference. That’s why it’s so important to sit down with your lender and a tax professional to discuss all of the details and associated financial risks before making the decision to proceed with a short sale. If you are interested in short selling real estate, here is a guide to help you get started.
Before You Decide
- Understand the options your lender has regarding loan default. Real estate is secured by many types of obligations, like liens, refinance loans, purchase loans, home equity lines of credit, and more. If you fail to make your payments, your lender’s recourse depends on the type of property you have, and the type of debt. All of this should be taken into consideration before you decide to move forward with a short sale.
- Beware of predatory rescue scams and short sale fraud that is becoming more prevalent. Home owners in danger of foreclosure are often targeted by predatory scams that promise to rescue them. They often cost money and provide no results, and could cause you to lose the home entirely. Here are some ways to identify a fraudulent scheme:
- Anything that guarantees to stop the foreclosure
- Instructions not to contact the lender
- A promise that you can buy-back or remain in the home following the transfer of title
- Required fees upfront
- Requests to execute a power of attorney
- Transfer of title or lease of the property
In order to combat the spread of these predatory companies, you should report any suspected scam to the Department of Financial Institutions at: http://www.dfi.wa.gov or by calling 1-877-RINGDFI (746-4334). Additionally, it would be wise to contact your lender directly at this point and to speak to their home retention or loss mitigation department. Explain your situation to your lender, and inquire about your options.
Obtain Legal and Tax Advice
Since short sales are complicated transactions that can have lasting implications, it’s important to sit down with a legal and tax expert who can give you a better understanding of how a short sale may impact you.
- A tax advisor can help you understand the Mortgage Forgiveness Debt Relief Act, and an attorney will advise you about your legal liability.
- Contact a qualified real estate professional. Having a short sale specialist on your side can make a big difference in this process. Discuss the matter with a real estate agent, and be sure to ask them about their short sale education and experience
We are a team of short sale realtors in Boca Raton. Please contact us if we can show you around this gorgeous part of Palm Beach County Florida.
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