North Star - Napoleon, Indiana

Southern Indiana Real Estate © 2007

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Real Estate - Short Sale

Real Estate - Short Sale © 2008

It is no secret that the real estate market has been a bit bumpy as late. Many homeowners find that the home they purchased has declined in value. In addition to this variable rate mortgages have caused many of these home owners to be faced with higher house payments than they can afford. The property owner may then fall behind in payments and be faced with foreclosure.

In this unhappy situation a process which is called a short sale may be the best option for the home owner. What is a short sale? A short sale is when the financial obligations on real estate are more than the real estate will bring in a sale. The short sale helps a homeowner avoid foreclosure, rescue their credit rating and escape a stressful situation.

The first step in conducting a short sale is to determine the homes current market value. This value is what the real estate will sell for, not what the owner needs to settle obligations. A couple of methods are used to determine market value. An appraisor may be called to do a formal appraisal. Or a realtor may perform a Competitive Market Analysis on the home. Either method will determine what the propery may bring in a sale. Stress the word may.

Next you will need to determine your selling costs. These can vary from state to state and locality to locality. The total loan liability on the home, liens on the property, real estate taxes and closing costs are all part of these expenses. If you are using a realtor, the commission will also need to be figured in as a cost of selling. A real estate attorney or realtor may help you determine what your cost will be. To do this, simply subtract the expenses from the market value of the home. This will be a negative number.

Now you will have to contact your lender. Explain the situation to the lender. Tell them you need to conduct a short sale of your real estate. You will probably be put in contact with someone in the foreclosure department. Make sure you are speaking with someone who has the authority to make arrangements with you. The process will differ from lender to lender. Some lenders will set an amount that they will take to settle the loan. Others will not do this, but will need to approve any offer made by a buyer.

If you have a realtor marketing your home, bring them into the loop as soon as possible. They can help guide you through the short sale process. You will need to give the lendor written permission for your realtor to call them and discuss the loan with them. The lendor will have forms and other information the realtor needs to complete the real estate sale.

Once the house is sold, you may want to consult a tax attorney. The short sale of real estate is considered relief of debt by the Internal Revenue Service and may be considered as income. In short, make sure you consult professionals at every step of the short sale to cover all your obligations and make sure everything is done correctly.
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