Short Sales
In this rough real estate market, many people have found themselves "upside down" in their home - they owe more money than their home is currently worth. If mortgage payments become too much to pay, this can mean foreclosure. In some cases, however, there is another option that can be pursued before it gets to that point. That option is the short sale.
In a short sale, the owner of the home makes a deal with their lender to sell the house for less than is owed. With the high cost of foreclosure (estimated at about $58,000 in a study by the Tower Group) and the increasing number of foreclosure properties on the Orlando market, many lenders are more receptive to this option than ever.
In order to negotiate a short sale, the owner has to prove to their lender that they are in great financial hardship. This does not mean an investor who overextended themself, or bailing out a "house flipper". The owner must have suffered a serious and documented financial hardship that directly resulted in the default on the mortgage - loss of a job, serious illness, or even the death of a loved one can be financial hardships. It can take a great deal of time, effort and paperwork to prove that such a hardship exists. It may be necessary to provide pay stubs, tax returns, liquid asset statements, and anything else the lender might need to get the complete picture of your financial situation. Sellers should be aware that the process will sometimes be quite involved and time-consuming. Despite that, the benefits can be worth the hassle.
It is also important to note that oftentimes, a lender will ussue a 1099 to the seller for the difference between what is owed and the final amount the lender collects after all the costs of the sale are tallied. A 1099 means that the difference will be considered taxable income to the borrower. Some lenders even attempt to get the owner to sign a note for the remaining amount due. Make sure you read all the fine print and understand everything. Remember, the lenders are still looking to make their money back with this deal, any way they can.
If you are trying to sell a home that is worth less than you owe, you might want to look into the option of a short sale. Though it isn't the magic cure for your debt, it is preferable to foreclosure and can help you unload that upside down house and get back on track to financial freedom. If you have any questions about short sales or the real estate market in general, please feel free to contact me or email me directly. You can also call or text me at (407) 421-1052!
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