These days many homeowners are defaulting on their loans and risking losing their homes. To save themselves from foreclosure, short sales have become very popular. This evening I found 38 listings in the South Lake Tahoe MLS that are possible short sales. If you are unfamiliar with short sales, here is a great article that was printed in a publication I received from the Nevada Real Estate Division.
By Bruce Alitt, Chief Investigator
A short sale situation occurs when the owner of a property owes more than the market value of the property and has financial hardships that require the owner’s lender or lenders to approve a sale in which the lender(s) will actually receive less than the amount that is owed.
The approval by the lender(s) is required because the loans are liens against the property that must be satisfied in order for clear title to pass from the seller to the buyer. That means that the lender(s) must accept getting less than the amount owed and agreeing that the lien(s) is satisfied and can be cleared.
Even though there must be lender approval in a short sale situation, the owner/seller still must be presented with and accept the offer. That is the critical first step in the short sale process. The owner must accept the offer contingent on approval by the lender. The contingency is critical because the owner cannot perform on the transaction without either the approval of the lender(s) or a cash out of pocket situation, which is usually not feasible. Once the owner has accepted the offer contingent on lender approval, the offer must be submitted to the lender with any other documentation required by the lender. This documentation varies from lender to lender. At this point the transaction is out of the control of the licensees and owner, who must wait on lender approval, counter offer or rejection. Due to the current number of foreclosures and short sales, this can take several months. Both the seller and buyer should be made aware, in advance, of this unknown time factor.
During this “lender approval” time period, the house should stay on the market, however licensees should be made aware of its contingent status.
The seller must be made aware that if the lender does agree to the short sale, there could be a deficiency judgment, credit consequences or the amount forgiven may be considered as income for tax purposes. Every seller should be advised to get professional advice from an attorney, certified public accountant and/or a tax consultant.