What is a real estate short sale?
A: Short sales is when you owe more than your property’s current value but still need to sell the property. Generally in a real estate transaction, the mortgage lenders require you to come in with the difference in the amount owed. During a short sale, we negotiate, on your behalf of the lenders to accept a pay-off that is less than the amount owed and therefore you do not have to pay the difference.
How much will this cost?
A: As the majority of people facing foreclosure usually do not have the necessary funds available to pay for typical real estate transaction fees, all of the fees will be provided for by our company to serve you. We only receive payment if our negations with the lender are successful.
What is required for a short sale?
A: In order to get a short sale approved we first must list your home sale. During the listing period, you will need to provide the following documents so we may request a short sale package to your existing mortgage lenders.
• Last two years W-2’s or tax returns if self-employed
• Most recent two months of pay-stubs or current Profit and Loss (P&L) if self-employed
• Most recent two months of bank statements for checking/saving accounts
• Current mortgage statement or payment coupons for all existing mortgages
• Letter of hardship explaining your situation and need to sell
Who qualifies for a short sale?
A: There are a variety of reasons a mortgage lender will accept a real estate short sale. If your financial situation has changed significantly you may qualify. If you are spending more money in bills each month than you are producing you are also a likely short sale candidate. Everyone situation is unique and lenders will take all factors into consideration when deciding on short sale. The hardship letter usually helps to influence a short sale request.
How will a short sale affect my taxes?
A: According to the IRS, if one has attained a compromise or settlement with a creditor/lender agreeing to release you from any further debt, a creditor may report this as ‘cancellation of debt’ income.
Your lender also has the potential to ‘write off’ all or part of the debt and report it as a tax loss to the IRS using a 1099-C. The IRS recognizes five situations where a canceled debt may not have to be reported as income.
1. Insolvency-your total debts exceed your total assets at the time your debt was settled or deemed non-collectable
2. Bankruptcy- the debt was already discharged through a bankruptcy proceeding
3. Indebtedness due to certain real property business losses
4. Indebtedness due to a qualified farm expense
5. Discharge of your debt was treated as a gift ( increasingly rare)
Most clients fall into the insolvency category. If you’re insolvent you must inform the IRS by completing IRS form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness and include with your individual tax return in the year you receive the form 1099-C.
This information provided is for your personal consideration and is not intended to be a tax or legal opinion. You should confirm any concerns about debt discharge with your tax advisor.
Do I need a real estate short sale?
A: If you owe more than your home is worth and you need to sell please contact Century 21 Group with Greg Harrelson for more information and we will be happy to assist you during this rather difficult time.
