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When Can A
"Short Sale" Be Used? |
When the
Owner/Seller of the house is behind in payments and the bank
has started the foreclosure process. The foreclosure process
is usually started when the Owner/Seller house is at least 3
payments behind.
It is when a Buyer offers to buy
the house for a price that is less than what is owed on the
house, and both the Owner/Seller of the house AND the bank
agree to it.
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Why Would
the Owner/Seller of the House Agree
to a Short Sale? |
Since the Owner/Seller is behind
in payments, the house has become a financial burden and
possibly an emotional burden to the Owner/Seller. So the
Owner/Seller is looking for relief from the debt, and relief
from the financial and emotional distress. Also, one of the
best reasons is that the short sale prevents the
Owner/Seller from getting a foreclosure on their credit
report.
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Why Would
the Bank Agree to a Short Sale? |
Because foreclosure is an
expensive process for the bank. Sometimes, the short sale
can save the bank money in the long run. Also when a bank
has a foreclosed property, it limits the amount of other
loans they can make. So it looks bad for a bank to have too
many foreclosures on their books at one time.
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Is the
Owner/Seller Allowed to Make Any Profit
from a Short Sale? |
No. Since the bank is basically
agreeing to lose money, by taking an amount less than the
loan payoff, they have a rule that the Owner/Seller is not
allowed to make any profit either.
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Does this
Cost the Owner/Seller Anything? |
No.
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Can the
Bank Sue the Owner/Seller for the Difference Between
the Loan Payoff and the Amount of the Short Sale? |
Since the bank must be in FULL
AGREEMENT with the amount of the short sale payoff, this is
usually not a problem. In fact, our offer written to the
bank requests that they will not sue for the deficiency
judgment. A deficiency judgment usually occurs as the result
of a foreclosure action, in which there is NO agreement on
the banks part with the Owner/Seller. So in a way, a short
sale can actually be a good way to avoid a deficiency
judgment.
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Are There
Tax Consequences to the Owner/Seller
on a Short Sale? |
Maybe. These are issues to talk
about with your CPA. We are not accountants and cannot
provide tax advice.
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How Long
Does the Short Sale Process Take? |
It depends on how easy your bank
is to deal with, and how quickly they respond once we
contact them. The entire process could take 7 days, 30 days,
60 days, or longer. Again, it just depends.
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How Do We
Get the Short Sale Process Started? |
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