A SHORT SALE COULD COST YOU!
I've had a couple of calls this year from persons who would like to get back into the housing market; they want to be home owners - again. I've been around long enough to know that stuff happens. Sometimes a home owner loses a job, a divorce happens, sometimes even death.
Here's something I've come to realize - often when a home owner orchestrates or has a Realtor orchestrate on his behalf a short sale he often does not realize the total consequences of that action.
1) A short sale can keep you out of the housing market for up to seven years. Lenders are getting stricter all the time about when and how they will allow a short sale home owner to buy again. There are hurdles that few home buyers are prepared to do, at least that is my experience.
THINK ABOUT WHERE YOU WILL GO FROM HERE
2) The short sale will be reported to your credit history and can be detrimental.
HOW WILL A SHORT SALE AFFECT YOUR PLANS FOR FUTURE PURCHASES?
3) The bank can report the short sale as income to the home owner.
WILL YOU END UP PAYING TAXES ON THE SHORT SALE AMOUNT?
4) The bank may try to collect the balance owing or place a lien on the home owner. Often the home owner has no knowledge that this can happen because it is a document that is swept up in all the closing documents that they may not be aware they signed.
WHAT DOCUMENTS WILL YOU SIGN AT CLOSING SPECIFIC TO THE SHORT SALE?
5) When you are in a position to buy a home again, the length of time you wait may be longer depending upon the amount of down payment you have available. If you have a substantial down payment, you can perhaps buy sooner than if you want to borrow the maximum amount.
WHAT ARE YOUR THOUGHTS ABOUT A FUTURE HOME PURCHASE?
6) Short sales are viewed very much like a foreclosure when it comes to buying a replacement home. You will have to prove that you had a good reason for the short sale. You will need to reestablish credit. You will have to perhaps prove you were not late on your mortgage at the time you executed the short sale. You will need documents from the lender that I've seen few borrowers have.
DO YOU KNOW WHAT DOCUMENTATION YOU NEED TO GATHER AND KEEP REGARDING THE SHORT SALE?
It is my experience that home owners have the impression they will walk away from a short sale with no lasting effect on their credibility because the bank agreed to it. This is far from the case. I would suggest if a home owner opts for a short sale they make it their job to educate themselves about all the pros and cons. I just spoke with a borrower who had a short sale that amounted to about $8000. They would have been better off to have taken a different approach.
Short sales are so common these days I question how equipped the Realtors are who deal with them. There are no doubt some who know their way around. When they are not educating the home owner about the consequences of the short sale, they are stopping short of their duty to them. All options need to be explored before going down the short sale road. Almost all home owners I've talked with had no idea the long term repercussions of a short sale.
I am not a short sale expert, but I have seen the above situations repeatedly which makes me think home owners are not taking charge of their own destiny when it comes to short sales.
