The short sale in real estate permits the homeowner to be spared of the shame and social stigma that may come with a foreclosure. There is no guarantee that the mortgage lender will accept the short sale but when he does, this means that he will be getting an amount that is less than the outstanding loan balance. Thus, the lender may only agree to the short sale if he is convinced that he will be able to get more through a short sale instead of a foreclosure that will have accompanying costs.
Because there are tax and legal implications of a short sale, the borrower may do well to consult with an accountant and a real estate lawyer. An accountant may be needed because the IRS may consider the forgiven debt as income and may be taxable. The lawyer may be required because there is still a possibility that the lender may require the borrower to pay for the difference between the outstanding balance and the proceeds of the sale. Such deficiency judgment may occur if the borrower had signed a promissory note, which may mean that he is personally liable depending on the state laws.
The first step for a short sale in real estate is to contact the lender. The next step is for the borrower to provide a written authorization for the bank to transact with his real estate agent or lawyer. Other important aspects of the short sales are the preliminary net sheet, hardship letter, proof of income and assets, copies of bank statements, comparative market analysis, and the purchase agreement.
