Is a Short Sale the right deal for you?

Everyone is talking about short sales these days. Including the news media. Here are the facts to decide if when selling or buying a short sale property is the way to go for you.
Sellers: Short sales can help you out of a sticky situation, but you will not get off scott free. Many lenders now require you to submit a copy of all of your monthly bills and W2 statements to prove that you are having a financial hardship, you typically even write a letter to the lender explaining all that has happened that has made it difficult for you to continue making full payments on your loan. There will still be penalties to your credit and possibly even tax consequences. Lenders definately are not in the business to be holding a lot of properties so some are willing to deal with you, but remember that any money that you are unable to payoff due to your loan amount being far more than you can currently sell your property for does not just go away. Some lenders may file a 1099 with the amount you failed to payoff. This means you will have to claim it has income on your tax returns that year and pay income tax on it. Some make you sign a personal note and still continue to pay on the amount that you did not pay off. Your credit will not suffer the loss of a forclosure but there will still be consequences to that as well, typically showing up as a chargeoff, which doesn’t look that great in the future either. You need to look at your situation and decide what is best for you and your family when in the situation and make sure you hire a professional who knows a lot about your market and how to work with banks on these short sale deals. You must be patient, banks do not move quickly on these and you are in a stack of thousands on their desk these days.
Buyers: Are you looking for a good deal? Just becuase it is a short sale does not mean that you are getting a property for signifigantly lower than market value. A lot of times you could be getting it just at market value. I am not saying that you can not find a good deal out there because you can, but the really good ones take the banks a lot of time to decide typically. You also have to have a great deal of patience when submitting an offer on a short sale. You are often dealing with a first and second mortgage. If you are this can take longer because often the first will have to agree with how much money the 2nd is getting and if the 1st feels like the 2nd is getting too much, they won’t deal. Doesn’t sound fair, but when you are in first lien position on a property, you can do that. This negotiating can go on for weeks or months, and you have to be flexible and patient. You also should consult a professional and find out if this is the way to go for you, it may or may not be or you may find a better deal out there from a seller that is not in financial distress.