Short Sales
At the risk of sounding obvious, in a short sale, you are selling the house and leaving. You are not selling it to a friend and moving back in; you are not selling to an investor and leasing it back. The FBI calls these practices “flopping” and since they refuse to prosecute Wall Street insiders, they will turn their time and attention to you.
The short seller will also not receive any cash or other consideration from the sale. There’s no check when escrow closes. While there are government programs that provide relocation assistance; they are lots of trouble to qualify for and work with.
Short sales are best used in situations in which you are outside the loan modification sweet spot or you simply want to liquidate the property.
Mechanically, the short sale negotiation does not begin until an offer to purchase the property comes in. Although the price can be determined in advance, by using available bank programs and depending upon how energetic the real estate agent and bank negotiator are, there is no need to spend the time and effort negotiating the deal until a buyer is located.
A short sale will have tax consequences; the mortgage lenders will all issue you a 1099 the year the sale is completed. It is critical that you consult with a professional tax advisor the year you complete your short sale.
In addition, depending upon how the short sale is negotiated, you may still be liable for a deficiency balance on one or more of the loans. A new law passed in July, 2011 prohibits this practice in California, but the law does not apply to other states and does not apply to short sales completed before July, 2011.
For more information on either of these topics, email us at: info@resultsadvisors.com
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