What Is A Short Sale And How To Manage It
The housing market is on fire right now, and that means short sales are becoming more and more common. Perhaps you’ve been thinking about listing your house and renting it out instead of keeping it as an investment. Or maybe you’ve recently encountered financial challenges; that have left you with little choice but to put your property up for sale so you can get back on track. Regardless of the reason; if you own a home that isn’t worth what it used to be—and if doing so isn’t a viable option for some reason—then a short sale might be right for you. In this article, we’ll explore what a short sale is; how to negotiate one, and the key things to consider before going through with the process.
What Is A Short Sale?
A short sale happens when you agree to sell your property to a third party, but instead of actually transferring the title; you just sign a contract promising to do so—creating an “escrow” account where the buyer’s bank writes a check for the agreed-upon price and then releases the property from your name. Once the contract is signed; you are done—no more having to worry about keeping up with payments or keeping your property standing. The bank sends you a check; you cash it and move on with your life. Because you’re not actually transferring the title, you have to do this through an “avoiding” real estate transaction. As a result, the IRS considers you a “seller” and will take the deduction on your income tax return (unless the contract is entered into as part of a short sale, in which case the seller will be considered the “buyer”). So you will have to pay taxes on the amount you received, and you will also have to pay taxes on the amount you owe.
How to Negotiate a Short Sale
Getting a short sale approved will likely take some effort on your part. It’s not enough to simply submit an application and wait for a call from the bank. Instead, you’ll want to be proactive, and enlist the help of a real estate agent to make the process go more smoothly. First, make sure you are aware of all the steps involved in a short sale. Next, set up a meeting with your mortgage servicer to explain the situation. Then, seek out the assistance of a real estate agent who specializes in short sale transactions. Finally, start sending letters to the bank, offering to accept a lower price than the amount you owe. When all these steps have been completed; you will have made yourself an easily manageable offer.
Things to Consider Before Going Through With A Short Sale
Just as any other form of real estate investing has its challenges, so does short sales. The good news is that there are things you can do to make the process go more smoothly. Before you take the plunge; make sure you’ve got a plan in place to address any potential hiccups. Here are a few things to consider: When trying to reduce your balance; you’ll want to be sure you have the resources to handle the down payment for the property; any closing costs, and any other costs that come along with purchasing a new home. Short sales can take time; so you’ll have to be willing to allocate some of your time to the process. You’ll have to visit the bank and the property multiple times; write letters and make phone calls, and generally work your way through a tedious process. This is a process that may not move very quickly. Be prepared for a slow process. You may end up having to do several short sales before one finally works out.
The Final Word
There are a number of challenges that come with owning a house that’s not worth what it once was, and a short sale is just one of them. However, if you’re in a situation where a short sale is the only option, you’ll get through it—just make sure you’re prepared for the process. If you need help bringing your short sale application through the process; a real estate agent can be a great resource. There are a number of challenges that come with owning a house that’s not worth what it once was, and a short sale is just one of them. However, if you’re in a situation where a short sale is the only option; you’ll get through it—just make sure you’re prepared for the process. If you need help bringing your short sale application through the process; a real estate agent can be a great resource.