A few years ago, terms like "short sale," "upside down," and "under water," were not even part of our lexicon. Today, they are common place. Following some 15 years of steady appreciation, peaking in 2006, home values in Michigan have since declined 45% on average. In Oakland County, distressed sales now account for approximately 93% of all home sales. If a short sale becomes your only option, here are some basics to keep in mind.
1. A short sale results when the seller owes more money on the mortgage than the home is worth.As a result, the seller is forced to negotiate a discounted payoff of the underlying mortgage debt with the mortgage lender in order for the sale to take place. Sellers want to avoid having to pay money against the mortgage at closing and to obtain a waiver of any deficiency. Buyers want clear title and a quick closing.
2. It is absolutely essential that a short sale contingency be included in the listing agreement for the property and in the purchaser agreement.Such contingencies will provide that the sale is contingent upon the ability of the seller to negotiate a short sale with its mortgage lender upon terms and conditions that are acceptable to seller, in seller's sole discretion. If the seller is unable to get such an approval, the purchase agreement can be terminated, buyer's deposit refunded, and seller has no obligation to the realtor under the listing agreement.
3. Mortgage lenders have very specific, detailed and comprehensive procedures that must be followed, exactly, in order for a short sale to be considered.Substantial documentation must be provided, and there must be full and accurate disclosure on the part of the seller. Failure to accurately disclose such things as hardship, income and assets, may result in the short sale being later set aside on the basis of fraud. The process is detailed and time consuming (as long as 6 months or more), ultimately resulting in either the rejection of the request or a statement of the terms upon which the mortgage lender will agree to the short sale.
4. Mortgage lenders are not required to waive the balance owing on the mortgage. They may require that some, or all of it, be paid by the seller at closing, or that the balance owing will remain payable by the seller under the original mortgage note or a new promissory note.
5. A short sale will impact the seller's credit rating and may adversely impact the ability to obtain certain types of mortgages in the future. And, any part of the loan deficiency that is forgiven must be reported by the mortgage lender to the IRS on Form 1099-C. Whether or not the forgiven debt is taxable depends upon a number of factors, including whether or not the home was the borrower's principle residence, when the forgiveness took place, and so on.
Based upon historic trends, many believe that it will take another ten years or more for homes to regain the value that has been lost in the past 4 years. Distressed sales (short sales) are therefore a fact of life that will be with us for years to come.
USED WITH PERMISSION
Duane L. Reynolds
Wright Penning & Beamer
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When you choose Scott Petersen and The Petersen Team to handle your Canton/Plymouth real estate needs, you choose a Realtors® who is not just an expert, but someone who cares about you and your family. Buying or selling a home can be a very exciting and yet stressful. We will work to achieve your objectives, bringing our years of expertise and hard work. In this difficult market, we are proven producers selling in the multi-million dollar range year after year.
We are very familiar with todays market and handle Short Sales, REO, Bank Owned, and all types of real estate in Wayne County , Oakland County, Livingston County, and Washetenaw County we specialize in Canton, Plymouth, Northville, Livonia and Novi.
Scott A. Petersen
Remerica Country Place
www.scott-petersen.com
spete05@gmail.com