What is a "short sale"?

[Smiling JOe]

Even in short sales, most banks will not forgive the balance owed, so, "without recourse" is not likely an option.

 

[SHELLY]

Even in short sales, most banks will not forgive the balance owed, so, "without recourse" is not likely an option.

....especially if the owers have other assets to tap. Lots of well-financed folks bit off more condos/homes/lots than they can comfortably chew. They would love to do a dump-and-run (like you can do in the stock market) but are discovering they may just have to keep throwing their money down a black hole for the time being....RISK is a four-letter word.



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[rapunzel]

So, is it even worth looking as something listed as a short sale subject to bank approval?

 

[seaside2]

Caveat emptor.

 

[Joe Mammy]

So, is it even worth looking as something listed as a short sale subject to bank approval?

Why not? Just be aware that the banks usually take longer to complete a deal than a deal directly with the seller. If you have patience and make an offer within the banks acceptable threshhold than you can get a great deal.

Just have your buyer's agent find out all they can from the listing agent. If the sellers have already proven their hardship and (lack of) assets and are in communication with the lender than you will most likely get a better deal in pre-foreclosure (short sale) than waiting until after foreclosure- the banks overhead of the property rises significantly when it becomes an REO.

 

[Bobby J]

I just took a short sale course at the board. Wow! Lots to learn. I have done two of these so far and seem to be more on the way. If anyone would like a short sale checklist, PM me and I will send you one.

 

[Smiling JOe]

So, is it even worth looking as something listed as a short sale subject to bank approval?

Could be, but not necessarily. Remember that many people who are short selling now, are the ones who bought when the market was peaking. You may find better values by people who are not in trouble, but bought long enough ago to still make a profit, and under-price, even the short sellers. Patience is a must if you make offers on short sales. I've heard some recent reports of people's offers getting approved by the lender, almost immediately, while some others may take as much as 4-6 weeks before the selling agent can even track down the lender's representative handling short sales and receive a response. Some lenders don't seem to be in a hurry, or maybe they are starting to get busy.

Just remember that short sale doesn't always equate to a great buy, but sometimes it may.

 

[InletBchDweller]

Could be, but not necessarily. Remember that many people who are short selling now, are the ones who bought when the market was peaking. You may find better values by people who are not in trouble, but bought long enough ago to still make a profit, and under-price, even the short sellers. Patience is a must if you make offers on short sales. I've heard some recent reports of people's offers getting approved by the lender, almost immediately, while some others may take as much as 4-6 weeks before the selling agent can even track down the lender's representative handling short sales and receive a response. Some lenders don't seem to be in a hurry, or maybe they are starting to get busy.

Just remember that short sale doesn't always equate to a great buy, but sometimes it may.

I could not agree more. Very well said....

 

[waterst1]

The big surprise I learned last week from a real estate friend is that the difference in the loan amount vs. the amount of the short sale is considered by the IRS a short term capital gain so the seller gets hit with gains taxes when the lender "eats" the loss.

 

[SHELLY]

The big surprise I learned last week from a real estate friend is that the difference in the loan amount vs. the amount of the short sale is considered by the IRS a short term capital gain so the seller gets hit with gains taxes when the lender "eats" the loss.

If it was the seller's primary residence, W gave them a "Get out of Jail Free Card":

"President Bush signed into law a new measure giving tax breaks to homeowners who have mortgage debt forgiven. Under preexisting law, the debt forgiven by a lender, such as for short sales and refinances, was generally taxable to the borrower as debt discharge income. With the passage of the Mortgage Forgiveness Debt Relief Act of 2007, a taxpayer does not have to pay federal income tax on debt forgiven for a loan secured by a qualified principal residence.

This tax break applies to debts discharged from January 1, 2007 to December 31, 2009. Qualified principal residence indebtedness is debt incurred in acquiring, constructing, or substantially improving the residence (up to $2 million for refinances).

For purposes of calculating capital gains, any debts discharged excluded from income under the new law must be subtracted from the basis of the taxpayer's principal residence (but not below zero). However, taxpayers may generally exclude from capital gains income up to $250,000 (or $500,000 for married couples filing jointly) for properties owned and used as their principal residence for at least two of the last five years."

http://activerain.com/blogsview/315203/MORTGAGE-FORGIVENESS-ACT-2


(Another reason to get out from under those properties before the clock strikes midnight on Dec 31, 2009.)


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