A short sell is a property sale where, to avoid a foreclosure, both the original purchaser and the lender agree to sell the property for less than the value of the mortgage on it. It’s the art of compromise with houses and multi-figure dollar amounts. A short sell is usually the last option before a full on foreclosure.
A short sell, or short refi, has a number of requirements before it can be consummated. The first is that the home owner needs to make the case for hardship, in the form of a letter to the loan processor. It needs to be a persuasive case that all other options have been exhausted and that a restructuring of the loan settlement is the best case for both the home owner and the lender. This will require a fair amount of documentation by the home owner; they need to disclose their entire list of assets and liabilities, and that this short sale is the best alternative to declaring bankruptcy or foreclosure on the property.
Once the lender has agreed to the short sell, in most cases, the house goes on the market to find another buyer. This means getting the home listed with a realtor or other sales agent, and then showing it to prospective buyers. Because most people doing short sales are in a hurry, there are a lot of steps in this process (home inspections, legal consultations and the like) that will eat time and have to be handled simultaneously. Among these concerns are tax judgments. In many cases, the IRS will treat the difference between the original mortgage and the short sell refinance as income for the person who takes it; while they can be quite forbearing on this, it may complicate your plans.
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