What Are Short Sales?
As a result of certain past lending practices and the recent declines in home prices many home owners have found themselves in an equity deficient situation. This is when a property owner owes more on their mortgage balances than the property is currently worth. Consequently some people find themselves in a position where they may need to sell their home but will not be able to payoff the mortgages with the proceeds. Under certain circumstances numerous sellers have been able to negotiate a discounted, or short, payoff to their mortgage lenders thereby allowing them to get out from under their home loan debts.
As your short sale Realtor it will be my job to actively market your property in the same manner as any traditional sale, and in addition I will be in constant contact with your lenders to negotiate a successful short sale. I will act as a liaison between your home lenders Short Sale Department and you so that the process is as smooth as possible. Aside from selling your home, my primary duty will be to ensure that the lender is made aware that you can no longer make the mortgage payments, and that the property's current market value will not allow a sale in which they can receive a full payoff.
There are many reasons to attempt to short sale your home as opposed to allowing the bank to foreclose. First and foremost, your credit is spared to some degree. It is true that a short sale will show negatively on your credit profile, however many experts believe and have seen that it is far less damaging than the alternative. Others have predicted also, with so many people in a similar situation, in the future lenders will differentiate favorably those who attempted to resolve their debt from those whom walked away from it.
Lenders have no obligation to accept your request for short sale (meaning you have no guarantee of success in this endeavor), however the cost of foreclosure is so great that many have taken to this practice more and more as the foreclosure rates rise.
Cost to seller:
Under most circumstances short sale transactions cost the seller little or nothing. The closing costs and commissions are generally paid by the lender, as a seller in this situation has proven not only that the property is worth less than the balances but also that they have no means of paying the loan any longer.
It is imperative that a seller contact both a legal and tax professional in regards to the consequences of a short sale, if any. I as a licensed Real Estate agent have no expertise in either the area of law or tax.