BE AWARE OF SHORT SALE CONSTRAINTS!

Short Sales are a popular Stop Foreclosure option today, but you must be aware of the Short Sale Constraints and possible ramifications.

While lenders are becoming more accepting of the idea of doing a Short Sale of a Home, they are fully aware that many folks in the past couple of years, made questionable financial decisions regarding the purchase of their homes. Today, the value of those homes has decreased, and, quite possibly, the monthly mortgage payments on these homes has increased. While the lenders are very willing to consider doing a Short Sale when the homeowner has experienced an unfortunate financial hardship, they are not willing to pay the price for the mistakes of an ill advised home buyer. So, take a look at the following list of Short Sale Constraints and see if any apply to your situation.

• Homeowner earns too much money. The bank will not be willing to accept the full loss on their own if you make a considerable amount of money. They may decide to accept a Short Sale, but ask you to sign a promissory note to pay the shortfall amount over time. Or, they may be more inclined to issue a deficiency judgement.
  
  
• Homeowners have money in a retirement account. They'll most likely want you to deplete savings in all accounts before they'll step in and assume the loss.
  
  
• The lenders will be checking to see if the homeowners committed mortgage fraud on their mortgage application. If so, there's a good chance that a Short Sale will be denied. Many people exaggerated income and/or assets on their NO DOC loans. Not to mention that mortgage fraud is a federal offense.
  
  
• There are time constraints involved in a Short Sale. A Short Sale can take up to 4 months to complete.
  
  
• The lenders may decide to issue an IRS 1099 form. What this means to you is that the shortfall is considered income to you and you may be liable for income tax on that amount. The IRS has rules regarding this and your situation should be evaluated by a tax attorney or accountant to see how or if this applies to you.
  
  
• As mentioned above, the lender may require you to sign a Promissory Note for the deficiency amount.
  
  
• There is the possibility of the lender issuing a Deficiency Judgement based on your ability to pay them back in the future.
  
  

An effective Loss Mitigation Expert may be able to successfully negotiate with your lender to negate all or some of the above Short Sale Constraints.