What to Know About a Short Sale Property

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When families find themselves staring at the prospect of losing their home to whatever reason, whether job loss, downsizing, relocation or anything else that is unforeseen – many times they feel cornered and unable to see the options.  For years during the current economic state that has resulted in an unstable real estate market, the answer seemed to be foreclosures.  But more and more often, short sales are taking over as the alternate choice. 

Here are three things worth knowing about short sales:

It Doesn’t Hurt to Ask For An Adjustment

Many people do not realize the benefits of simply engaging in dialogue with their banks.  With the large number of distress sales out there these days, banks are far more willing to engage in conversations about alternatives to foreclosure.  Foreclosures end up costing lending institutions thousands of dollars to litigate, plus hours of time and resource put in to handle each case.  By expressing the desire to explore a loan modification, banks are relieved of this stress and are likely to agree with a loan modification.

Through an adjustment of your current interest rate, you may be able to afford the same home and spare you and your family the difficult process and impending negative impact of a foreclosure.  Not only does a loan modification save homeowners money, it also protects their credit from long-term negative affects otherwise experienced with foreclosures.

Know What The Tax Man (Or Woman) Has To Say

Short sales are a great way to spare a family of much pain but there are tax implications.  Like anything else, before embarking on this financial shift with the ownership of your home, it is a good idea to familiarize yourself with everything you need to know about the taxes involved.  In short, the tax liability works like this:  On a mortgage with $200,000 owed that has a short sale of $100,000, there is that remaining $100,000 left that will show up on a 1099 in your name.  This translates to income and should be managed with a tax advisor so you understand all there is to know about that real estate income.

All Players Must Agree to the Terms

A lot of times mortgages involve multiple lenders.  When those homes are being purchased, surely the thought of needing to do a short sale was not a consideration.  Now that you do find yourself looking at a short sale, it is essential to iron out the terms of agreement with all lenders involved. 

When there is more than one lender the secondary bank must agree to give the primary lender a portion of the liability on the difference to you.  This sounds easy enough but since this can be a matter of lender-specific policy, you may come across a lender that is unwilling to agree to this term of a short sale.  By researching in advance the number of banks that are involved and what their respective policies are regarding short sales, you will cover important bases and be far more prepared.
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Short sales are a choice that offers many families reason to hope and a path to dream the reality of living in their own home again, without struggling to manage the mortgage.  Armed with the key knowledge necessary to tackle this newest intervention on the real estate woes of many, you can and will hope to succeed in your housing endeavor and look forward to a positive outlook!

What Determines the Value of Your Home?

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Basically, a home's worth is determined by its market value. How is "market value" determined? Most often, it's figured by a comparison ("comp") with homes similar to yours in the surrounding area. So, if the homes in your neighborhood average, say, $250,000, then it's likely that the value of your property will fall in the same range. But market value is also determined by a number of factors including the following: 

External Factors 

There can be several external factors influencing the value of your home. One is "curb appeal", or the first impression your property makes upon prospective buyers. A home that's in excellent condition on the outside will make a great first impression; a home in poor repair instantly loses its appeal to buyers. Other factors can include lot size, popularity of an architectural style of property, water/sewage systems, paved roads, sidewalks, etc. 

Internal Factors  

The condition of a home's interior also has a huge influence on prospective buyers. When you've demonstrated "pride of ownership" and kept up the maintenance (quality paint, trim, molding, etc.), a buyer's interest will immediately perk up for the simple reason that they know your care and concern will result in less cost and maintenance for them. Other internal factors include construction quality, condition of appliances, size and number of rooms, heating/cooling type, energy efficiency, etc. 

Supply and Demand 

"Supply and demand" simply refers to the number of homes for sale versus the number of buyers. When there are more homes than there are buyers, prices tend to be lower. When there are a lot of buyers chasing few homes, then prices tend to rise. In effect, supply and demand affects how quickly your home will sell. Location More than likely, you already know the old saying, "There are three main factors in real estate - location, location, location." While that's not the whole story, desirability is a big factor for home buyers. They may want to live in particular school district known for its education excellence…a great and safe neighborhood with rising property values…etc. 

But I Know My Home Is More Valuable Than a Lot of Comparable Homes in My Neighborhood  

Aren't Allowances Made for This? Definitely! Sometimes, it can be difficult to find homes exactly comparable to your own. So, dollar adjustments are made for the differences between your home and comparable properties. 

Where Do I Find Sales Comparison Information? 

The easiest source to access is your Realtor. After all, it's his or her business to know such information! But, there are also other sources you can tap into in order to get a complete picture of your home's value in comparison to others in your neighborhood. Here's an overview of them:

1. ) The Local Assessor's Office  

It's very likely that your local assessor will be able to provide the sales history of a particular house, neighborhood, or style of architecture. Many assessors also provide lists of recent sales which you can browse and compare to the assessment roll. Today, many municipalities provide local sales and assessment information online making it very easy to access. Check with your local government agency to find out if they provide this service. 

2.) Online Private Companies  

You can search for these companies using the Google search engine and the keywords "comparable home sales" or "comparable sales." Some companies offer free information; others charge a nominal fee. If you wish to get more specific, you can Google "real estate database" and type in the name of your particular state to get additional property information. 

3.) Your Local Newspaper  

It's likely that your local newspaper is a great source of specific real estate information. Look for quarterly sales reports in the real estate or business sections.

The Key to Getting the Price You Want (or Close To It) for Your Home 

The key to getting the best value is finding and matching the right buyer to your home. And that's the job of the Realtor! He or she should work hard to qualify those buyers upfront so the right people are viewing your property! In other words, the Realtor should weed out "lookers" and other unsuitable buyers as a first step in working with you. See how I do that for you by calling me today!