What Is A Short Sale In Real Estate?

If You’re Currently Paying A Mortgage, Here’s A Question That You May Have Heard: What Is A ShortSale In Real Estate?

Have heard of the term ‘short sale’? Do you know what is a short sale in real estate? A short sale is an option for homeowner in financial distress and having trouble making mortgage payments. It means that the house is being sold for a price lower than the amount still owed on the mortgage. The difference between the balance and the sale price is called the deficiency. All the proceeds of the sale go to the lender.

The lender can opt to forgive the difference or get a deficiency judgment. A deficiency judgment is a court ruling against aborrower in default on a loan. Some states require that thedifference in a short sale must be legally forgiven.

In Florida, the law allows banks or lenders to get a deficiency judgment after a short sale. If the property is residential and occupied by theowner, the deficiency is “limited to the difference betweenthe outstanding debt and the fair market value of the property on the date of sale.”

As the borrower, you may also be required to sign a promissorynote stating that you will pay the difference owed. The lender cango to court if you fail to settle the amount. If the lender doesnot require a promissory note, you may have to pay taxes on the forgiven amount, as a condition of short sale transactions inFlorida.

What Is The Difference Between A Short Sale And A Foreclosure? What About A Mortgage Forbearance?

A foreclosure is a legal action wherein the lender seizes thehome from the borrower. This happens when the latter is unable topay the mortgage for three to six months. This is usually a lastresort. Borrowers who have received a Notice of Default can opt tosettle through a short sale. This period is called apre-foreclosure.

One difference is that only a lender can start a foreclosure process. A short sale, on the other hand, is a process initiated bythe borrower and approved by the lender.

Another major difference is the impact on the borrower’scredit rating and their ability to purchase a home afterward. Witha short sale, you can be eligible to buy another house right away.However, an ex-homeowner who has gone through foreclosure will have to wait at least five years to purchase another home. A foreclosurewill also be on the borrower’s credit report for sevenyears.

Mortgage forbearance is an agreement between a lender and aborrower that allows the latter to settle dues and avoidforeclosure. The homeowner is usually allowed to delay payments andthe lender agrees to not foreclose the home. At the end of thegrace period, full payments must be resumed, plus taxes andinterest, depending on the terms of the agreement.

This type of agreement is considered a short-term solution. Ithas been common in recent months, as many homeowners struggle withthe impact of COVID-19.

Navigating Short Sale Transactions In The Central Florida Real Estate Market

The real estate market is in a precarious situation right now. If you feel like a short sale is the best solution for you, give us a call now.

Corcoran Connect is renowned for our honest, timely, and adaptable service. We also have extensive and deep-rooted knowledge of the local real estate market. We can provide expert advice onhow to best handle a short sale transaction.

Don’t wait until the last minute. Talk to us now and let’s find out how we can help.