Call Me Today: 707.769.7188

What is and why should you care about a “Short Sale”?

Simplified, selling a home for less than what is owed to the lender(s) is known as a “short sale.” Why should you care? If you’re a seller, learn now what you can do before it’s too late. If you’re a buyer, you can take advantage of an under priced home needing to sell quickly.

#1 – Hire a trusted, experienced Realtor® willing to help you to try and work things out with your lender before going through the process of selling your home on a short sale. Selling short is definitely better than foreclosure or bankruptcy, which can stay on your credit record for seven and ten years respectively.

#2 – Talk taxes with your tax advisor about possible tax repercussions. It’s likely the IRS will consider the difference between the value at which you sell your home and the mortgage balance as “income” on which you’ll have to pay taxes. In most cases the exception to this rule applies if you can prove that you were “insolvent” – that your debts were bigger than your assets- before your mortgage lender agreed to a short sale of your property. A tax advisor will be able to tell you for sure whether you’d be considered insolvent by IRS standards. If you can’t prove you’re insolvent, and the tax bill on a short sale would be more than you can pay, you may have to let the mortgage lender foreclose, or declare bankruptcy.

#3 – Be upfront with your real estate agent. If you find selling you house for less than you owe on the mortgage is an option short of foreclosure or bankruptcy, you’ll want to find a real estate agent who understands your situation. Agents typically take a much lower commission on short sales, and it often takes much longer to actually close the sale once the seller accepts an offer. Many agents may sympathize with financial problems brought on by unexpected circumstances, or loans that have reset at a higher payment but may not have the expertise or desire to be your advocate with your lender to help a difficult situation turn out better.

#4 – No buying big-ticket items, e.g. cars, boats, jewelry, etc. Your lender will see these debts on your credit report and become convinced you’re a loose spender who doesn’t deserve a break.

Short sales take much longer to close than more conventional sales, so plan accordingly. When it works, you’ve avoided foreclosure, bankruptcy and an ugly mark on your credit report. If it doesn’t work, you’ll know that you’ve done everything you could to avoid foreclosure and/or bankruptcy.

For more answers to your questions, contact your short-sale expert, who is ready, willing and able to work with you through the process – David Thomas,, 707-769-7188