A short sale in real estate is a way out of filing bankruptcy or foreclosing on a property a homeowner can no longer afford. Enter the process of short sale negotiation, in which a homeowner is able to sell the house at a lower price and pay off a smaller loan balance. This results in huge discounts on mortgages for real estate investors. When a lender forgives some portion of the debt left on a mortgage, you can hack that amount off the total cost of a home. Short sale negotiation of a home is tricky, but if you know the facts it is a whole new possibility that can be explored. It's probably not as hard as you think.

Short sale negotiation of a home mortgage is an alternative to foreclosure or bankruptcy used by those who have reached a point where they can no longer make monthly mortgage payments. Maybe the reason is job loss, loss of income, or increasing bills. The lender is then put into in a place where he can accept less than the total amount due on the mortgage, likely because the local real estate market is less than healthy. A market with falling home prices will be ripe for the short sales of homes.

A lender who accepts a short sale is liable to pursue the borrower for the difference. That's where the lawyer comes in; only the lawyer can determine whether that difference can be treated as a claim or a deficiency judgment.

Another key thing to remember in short sale negotiation is that you're going to need some patience. Negotiating with the banks can take four to eight months. There are a few variables a short sale in real estate depends on:

- The current real estate market

- The financial situation of the individual borrower

If you choose NOT to ask for my help, let me encourage you to look for a negotiating firm to negotiate your short sale with the bank.  There are negotiators who specialize in this so that you're spending your time investing and running your properties. The short sale negotiation process is much easier when experienced negotiators work with the banks for you.

Opportunity exists for lenders because of the current economic downturn. People who can't afford their homes don't want to lower their credit scores by filing bankruptcy or having a foreclosure on their credit report. Lenders don't want to have to deal with delinquent borrowers. Investors want to buy a house through a discount, fix it up, and resell it for a profit. This can be done most efficiently through a short sale conducted by an experienced negotiator. So give it a try but just remember to be patient; sometimes it can take up to eight months to negotiate with the banks.

Alternatively, give me a call and I can handle both the Short Sale and the Sale of your home.  I’m on YOUR side!

Negotiating a short sale between the borrower and the lender takes skill, patience, and expertise. Here's What YOU Need to Know about Short Sales:

1. Your credit rating will drop after a short sale, but not as much as with a foreclosure. I have seen estimates of a drop of 80-100 points off one's FICO score. That kind of drop is far less damaging than what a foreclosure does to one's credit score.

2. They will receive a 1099 for forgiven debt and will owe taxes on the amount. That may change. At the time of this writing there is a bill before the Senate that, if passed, will eliminate the taxed owed on this type of forgiven debt.

3. If the Seller meets the IRS definition of insolvency, (debts exceed assets), they will not have to pay taxes on the forgiven debt. I am not giving you tax advice, that's not my expertise. I am encouraging you to talk with a competent tax accountant about how a short sale may affect your tax situation.

4. The lender may ask the seller to sign a promissory note for all or part of the forgiven debt as a condition to the short sale. This could be attached to other assets if the note is not paid when due. This may be rare, but it has been known to happen. Remember, everything is negotiable.

5. The US House of Representatives has passed the Mortgage Cancellation Tax Relief Act (H.R. 1876), which would eliminate taxes on any forgiven debt on a principal residence through a short sale or foreclosure.

6. Chances of getting a mortgage during the next 12 months are almost zero. However, if you have paid all your other bills on time, your credit score will probably improve rather quickly.

7. The short sale process may take months. This is no quick process. It can easily take three to four months at least.

8. Buyers may not have the patience to wait for the lender's approval and may back out. This is a risk the seller takes when a contract is signed. It is advisable to make sure the buyer understands the short sale process and is willing to hang in there for the time it takes.

9. All commissions, expenses, fees, and closing costs can be wrapped into the short sale so the seller has no money out of pocket.

10. There is NO OUT OF POCKET COST associated with the short sale for the seller if you choose ME.  I will negotiate with the lender to pay it all.

The more you know about short sales, the better decision you can make regarding your financial future.

I’m  your CSCA Council Member™.  To learn more about Short Sales or Bank Owned Properties, give me a call today and get ready for a successful home sale or purchase tomorrow.