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By: G. M. Filisko
Have to sell your home for less than it’s worth? Our seven tips will help you get the best price.
There are five important steps to consider if you are faced with a short sale.
When you owe more on your home than it’s worth, but you have to sell, you need to squeeze every dollar possible from the sale. Here are seven tips for navigating the short-sale process.
A short sale has to be approved by any company that has a mortgage or lien against your home. That includes your first, second, or even third mortgage lender, your home equity line lender; your homeowners or condominium association; and any contractors who’ve placed a lien on your home. Make a list and start talking to everyone early in the process. Ask what documents they’ll need from you.
You’ll need to work with a team of short sale experts, including a real estate agent, real estate attorney, and your accountant. Look for agents and attorneys who advertise themselves as short sale experts. Interview at least three, and listen carefully for signs that they understand the complexities of the short sale process.
Agents should explain how they’ll arrive at a suggested price for your home. Ask them to show you a sample short-sale package or for an example of a prior short-sale success.
Gather the paperwork your crs and mortgage lenders asked to
see, like your listing agreement and a hardship letter explaining why
you need to do a short sale. You’ll also need proof of what you earn and
what you owe as well as copies of your federal income tax returns for
the past two years.
Despite a federal rule saying banks participating in the federal government’s
must respond to short-sale offers within 10 days, it may take weeks or
months for your lender to decide whether to allow you to sell your home
in a short sale—and even longer if you must negotiate with more than one
lender or lienholder.
Your lender and lienholders don’t have to agree to your proposed
short sale. They can reject your terms or make a counteroffer, which can
create further delays.
Discuss with your short-sale team how you should respond to common
short-sale demands from lenders. For example, are you willing to sign a
promissory note agreeing to pay outstanding amounts after the sale is
complete?
Any unpaid amount of your mortgage “forgiven” by your lender through a
short sale may be considered income to you under federal tax rules. Ask
your attorney or accountant whether you qualify to exclude that amount
as income on your tax returns under the . Also ask if you’ll be required to report
amounts “forgiven” by other lienholders, if applicable.
Ask whether your lender will report the short sale to
credit-reporting agencies. Having a portion of your debt forgiven may
negatively affect your credit score, but a short sale typically damages
your score less than a foreclosure or bankruptcy.
Ask you lawyer whether you’ll be responsible for paying back the
lenders’ loss. If the lender says it will forgive any losses on the sale
of your home, get that promise in writing.
This
article includes general information about tax laws and consequences,
but isn’t intended to be relied upon by readers as tax or legal advice
applicable to particular transactions or circumstances. Consult a tax
professional for such advice; tax laws may vary by jurisdiction.
G.M. Filisko is an attorney and award-winning writer. A frequent
contributor to many national publications including Bankrate.com,
REALTOR® Magazine, and the American Bar Association Journal, she
specializes in real estate, business, personal finance, and legal
topics.
SOURCE:
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