What are short sales in real estate?

If a homeowner can no longer keep mortgage payments current, how can he or she avoid the shame of bankruptcy or foreclosure? There is another way. Consider, for example, the SHORT SALE in real estate. In a short sale the homeowner may sell the home, and the lender will accept less than the full amount owed. There are lenders who won’t accept a discounted payoff or short sale, especially if foreclosure affords more money. In addition, the property may not qualify.

To avoid legal complications, the homeowner needs to consult a lawyer and a qualified tax accountant before moving forward with a short sale in real estate. There must be clarification on IRS status. It is possible that the IRS might consider the difference between the discounted payoff and actual money owed as income.  It is also necessary to determine if the lender can approach the homeowner later to collect the deficiency.

The homeowner may need to submit documents listing the expected sales price, plus costs and fees.  It is also prudent to attach a letter explaining the homeowner’s financial problems and how they came about, as well as a listing of income and assets and bank statements. When the homeowner finds a prospective buyer, he may need to present a comparative market analysis of homes in the area.  The lender will require a copy of the offer to buy the property.