- From JAN 2004-JAN 2006 27% of consumers purchased homes with less than 5% down payment.
- 19% of buyers purchased home with ZERO down payment.
- 31% of all Mortgages issued in this same timeframe were to consumers that utilized some sort of alternative lending program.
The Term “Short Sale”
Short Sale is defined as a Lender agrees to accept a discounted pay-off.
The Lender may agree to release the property upon receipt of less than what is actually owed on the loan.
NOTE: The Seller could be in pre-foreclosure
Why Would the Bank say YES?
Banks do not want to take the property because:
- The Neighborhood has depreciated.
- REO property condition is normally poor.
- Bank shareholders are concerned when there are too many defaulting loans on the books.
- An REO is a liability, not an asset. Too many liabilities can cause a lender to go out of business.
Banks don’t want to be in the property management business.
A short sale relieves the consumer from a negative equity situation/foreclosure.
The remaining debt does not disappear. (including any Homeowner Association dues, Property Taxes, etc.)
The Credit Report will state “paid off-settled”.
- No real negative impact to credit report if payments have been paid on-time until date of sale.
If there are mortgage late pays, they will be reported to depositories and will remain on the credit report for 7 – 10 years and considered derogatory.
What Happens to the Remaining Debt?
Seller may still owe the money. The Lender may pursue a deficiency judgment and can collect in the same manner as any successful judgment holder. These may include: Liens on other properties owned and Garnishment of wages.
Remember, a debt which is forgiven is taxable income. The seller(s) may receive a 1099 and they would have pay taxes on the amount reported.
For more information about a Short Sale give Earl a call :770-377-5793 or drop me a line:EARL@EARLPARK.NET