Short sale?

There's the standard things to worry about, many of which a home inspector should be able to find. Condition of roof, insect damage, dry rot, etc.

In the case of a short sale, as long as the bank or holder of the current mortgage is willing to release the liens for an amount less than the full amount due, you should be ok. Really, that's what your lawyer would do for you at (well, before) closing, he would ensure you have a free and clear title only subject to your own mortgage, and whatever easements (such as utility) that cross your property.

If I am the bank, I'd rather get $300K in cash against the note I hold for $350K, than to have a property just sit there and run the risk of vandalism, fire, etc.

There will come a time when the bottom has been reached, and it again makes more sense to buy than rent, we just may not be there yet. JOE

Can someone please explain how the term "Short Sale" applies to real estate?

It's when the sale price is less than the the current mortgage, same as 'upside down'. It's not the same short as selling a stock before you own it. Just happens to be the sale word. JOE

yes. Delete the term "short sale" and substitute "seller highly motivated for a prompt sale".

I was intrigued by the subject line, for the same reason.

did you stop to think that maybe the $485k figure is ridiculous in the first place?

In article , "Gil Faver"

JoeT - it's unusual in CA to use an attorney. Chris - key element of a short sale is that the lender forgives all or part of the shortfall. Owe $330k, sell for $300k, that's the end of it. I have no sense how common these really are, they require that the lender go along with it.

JQ - you probably know whether this specific IE house has negatives that drive the price down, even things that might have come to light only recently (traffic, wildfire risk, mold, gang activity in the school, etc). But it would not surprise me if the IE ends up with many 4BR/2BA homes in the $300k range, just based on income ranges in the area, once the housing-bubble dust settles. Incomes set a limit on home prices, in an area where people actually buy homes to live in instead of as lottery tickets or vacation residences. Eventually, anyway.

Another comparison to do is rental cost vs. ownership cost. I just did a quick craigslist and there's a big range for 4BR + pool, under $2k to over $5k, so that really depends on the specific area.

It is possible a bargain short-sale will come up, I just wouldn't use recent list prices or even 03-06 sale prices to gauge what a bargain is. So maybe it's just the market adjusting. I don't know of any buyer concerns specific to a short sale. I guess they could set a low list price with the hope of generating interest and an overbid, but that's the same with any stale-fish listing.

-Tad

That makes sense. The lender would rather get something and minimize their losses, than foreclose, own a property they don't want, and lose more, anyway. Obviously it requires some prearrangement and, I assume, active participation by the bank.

Thanks.

"Gil Faver"

On Sat, 5 Jan 2008 20:42:52 -0600, TB wrote: snip

It is my understanding the $30000 shortfall in your example would be

Weathermanbill

Normally that's true, forgiven debt is generally considered income under federal tax law (unless it's forgiven in bankruptcy, or some other special cases). But this was part of that mortgage relief bill at the end of 2007. For the next 3 years, debt forgiven as part of a short sale or refinancing workout won't be considered income.

-Tad

I'm sure. Liability reduction = income.

I don't think that's quite right. I think the term "short sale" applies when the sale price is less than the current mortgage *and* the mortgage holder has agreed to accept less than the full balance to pay off the mortgage.

I know someone who sold a house at a loss and had to come up with $20K to pay off the balance of the mortgage. I don't think that counts as a short sale.

I also know someone who bought a house as a short sale after the sellers had failed to sell the house for nine months during which they had missed the last four months' mortgage payments.

I stand corrected. Upside Down = owing more than one's home's current potential selling price. Short sale = When bank accepts a sale price less than their mortgage and lets buyer off the hook for any difference.

As far as any tax due on the difference to the seller, Tad pointed out a change in the law. Here is an article published a couple weeks back;