Now that the market is ripe with foreclosures and other bank owned property, we want to take a moment just to clarify what a short sale really is.
What is a short sale?
To sum it up quickly and concisely, a short sale is a situation in which the lender allows a property to be sold for less than the amount owed on a mortgage and takes a loss.
How does it benefit the homeowner?
After submitting thorough documentation, including, but not limited to:
- W-2 and pay stubs to verify income
- Bank statements to assess assets and financial situation
- Hardship Letter to explain why the bank should consider your property for a short sale
the bank may consider a short sale. The process can help keep the homeowner out of bankruptcy and save their credit rating.
The house will be sold and the difference between what you owe the bank and what the bank received on the sale will either be written off or the seller will be responsible for it.
NOTE: It is important to understand that if the bank writes of the difference, they will more than likely report it as 1099 income for the seller. This could adversely effect the seller’s tax liability. Speak to a tax professional. Remember, just because they write it off, doesn’t mean it disappears.
For an even more thorough look at short sales, check out the resources below:
