There is hope! A Short Sale Seller can purchase a home!
Two years after a short sale, a seller can buy a new home!
Fannie Mae recently announced that sellers, who elect to sell on a short sale over letting the property go through to final foreclosure, are eligible to buy a new home after two years. Although there are no exceptions due to extenuating circumstances, this new ruling means there is finally a logical reason to do a short sale now.
What is a Short Sale?
Wikipedia does a great job explaining what a Short Sale is:
In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.
Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower’s financial situation.
A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, the advantages include avoidance of having a foreclosure on their credit history. Additionally, a short sale is typically faster and less expensive than a foreclosure.
Home Owner Relief
What a short sale can do for a homeowner in trouble:
- Preserve Credit Rating
- Allow WNY home owner to sell without any out of pocket expenses
- Eliminate Negative CASH Flow
- Reduce Tax Liability
- Avoid Potential Foreclosure and possible bankruptcy
- Release of Mortgage Obligation
- Relieve Financial and Emotional Stress
Read Also: Do you have the Credit Score Blues?
Taxes and Legal Ramifications of a Short Sale
As a New York State Realtor, I am not licensed as a lawyer or a Certified Public Accountant and cannot advise you on these matters. Be aware according to the Mortgage Forgiveness Debt Relief Act of 2007, the I.R.S. could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. It is important to speak with your attorney and accountant to find out the ramifications of a short sale to you.
Read Also: New Exit Strategy:Â Short Sale
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The property information being provided is for consumers' personal, non-commercial use and may not be used for any purpose other than to identify prospective properties consumers may be interested in purchasing.