What is a short sale?
A short slae is when a lender accepts a discount on a mortgage to pay-off to avoid a possible foreclosure auction or bankruptcy. While the property is still being purchased, the Lender’s approval of the contract and terms becomes necessary as they must approve the discounted pay-off. For example: A homeowner, who is facing forecloure, has an existing first mortgage of $300,000. The buyer writes an offer for $220,000, which is accepted as full payment for the loan. This is a SHORT SALE.
It is best to do a short sale when the property is in the pre-foreclosure state because the banks do not like excess inventory and ad loans on their books.
What happens to the Seller’s credit rating when they allow an investor to short sell their property?
What typically happens is that the loan will show as “paid” on their credit report; however there will be a notation that say’s “settled for less than original owed” or something along those lines. It is more favorable for a homeowner to short sell than to have a foreclosure on their credit report.
Can an owner profit from a short sale?
The Seller cannot profit (monetarily) from a pre-foreclosure short sale.
*always contact your accountant for possible tax liabilities
For more information contact “Team Elite” 925-392-4131