If you own a home, and you are looking to sell, then you might have heard about the recent housing bubble, and the subsequent popping. Many homeowners are finding themselves over-leveraged, gasping for air, and looking for answers. Many have discovered short sales as the best way to get out from under the crushing weight of negative equity without having to declare bankruptcy, or fight a tidal wave of bad credit. In this article, you will learn the truth about the negatives and positives of short sales what they might mean to you and your family, and how you can make sure your financial future is bright.
Short sales are typically used when the market value of the property is less than the balance of the mortgage. It means to SELL the property SHORT of the mortgage balance. We are in a unique time in which you are not required to be late on your mortgage payments to qualify for a short sale, which was the case even just a few years ago. If your property is over-leveraged, then you are probably eligible, even if your only hardship is the value of your home. This change in the rules is designed to help protect your credit and avoid making a bad situation worse. In today’s market, almost 7.3 million homes are worth less than their mortgages, and the question everyone wants an answer for is how long are they required to to wait for their property value to come back.
With so many possible candidates, what are some of the pitfalls homeowners face?
Like almost any kind of financial situation, it’s important to be well informed and take the counsel of experts, and to know what you are up against. Banks take tax deductions for losses on the house sales, and that means the gain has to show somewhere, and to someone, in this case, the homeowner. Also, since the full amount wasn’t paid back, the bank will report the status something similar to ‘PAID FOR LESS’ on the homeowner’s credit report. The bank might also choose to release the homeowner from the lien on the house, but not the debt, which might have to be paid back at a later date. They might ask for a promissory note to help the transaction go through and minimize loss. However, because the short sale is a transaction that benefits all parties involved, including the bank and the homeowner, everything can be negotiated or handled.
Banks know houses are underwater, and they also know that if they had to foreclose on the property, they would eventually have to sell the property at market value, and realize the loss. When a homeowner offers a short sale, it means the bank can avoid going through a costly foreclosure, holding costs, eviction and maintenance. Most banks are also looking to the future to protect their bottom line, and approving short sales on properties that are not behind on payments, just over-leveraged, may be the most cost efficient thing for them to do. The IRS also helps out through the Mortgage Debt Relief Act, allowing homeowners to avoid the tax implications of a short sale for most properties. And homeowners can look to purchase a new house within 2 years of doing a short sale, and a credit score recovery in as little as 1 year. Both the homeowner and the banks are trying to figure out how to make short sales easier and more successful.
Eventually the banks or government may come up with an official checklist on how to successfully complete a short sale to help everyone, but for now, your best bet is to consult an expert. The first expert every homeowner needs on their side is as an experience short sale foreclosure homes Edmonton agent. If you employ the right Realtor, you will have an advocate and expert advising and guiding you from how to sell your house, all the way to a successful title settlement. The next expert can be either an agent or an attorney, but it’s someone who can negotiate with the bank to make sure the short sale completes quickly, successfully, and on the best terms for the homeowner. The last expert is a title company that knows how to close a short sale and is familiar with all the new laws passing on what seems like a monthly basis. Missing just one expert can lower your chances of success, and the homeowner might find themselves at square one with an over-leveraged house, losing hope quickly.
While reading this article, more questions probably came up. It’s impossible to provide all the details about all of the new laws on the books, or the steps needed to make a short sale successful. There are going to be some pains when recovering from almost anything, and this is no different. The key is to know who to turn to, what to do, and how to do it. The banks are going to do what they have to in order to survive this housing bubble, and they are doing what they can to encourage the homeowner to do the same, because at the end of the day, we all need to survive for this system to work.
To read more about buying foreclosed homes please visit:
Foreclosure Listings Canada http://www.foreclosuresearch.ca