| The latest craze around these parts (San Francisco | | | | months away from having any information on which |
| Bay Area)--at least with stressed out under-water | | | | you can really act or from really even being able to |
| homeowners and under-employed residential sales | | | | present the deal to your lender. How long is that |
| agents--is the "short sale." A short sale is nothing | | | | lowball offer going to hang in there? Long enough for |
| more than a sale of a piece of real estate for less | | | | you to screw up your credit and set yourself up for |
| than the amount of the total debt secured by it. The | | | | success? 3. The lender will require you to provide, |
| concept is attractive, though the reality is significantly | | | | together with the signed purchase and deposit |
| less so. Whether it's worth the hassles and heartburn | | | | receipt mentioned above, at least two years of tax |
| is going to depend on your particular situation. | | | | returns (federal alone will usually suffice); Two to |
| However, assuming you've decided to actually go | | | | three months of pay stubs; A hardship letter in which |
| through with trying to do this, here are some | | | | you bare your soul and in an attempt to pluck the |
| thoughts and cautions... First of all, I don't take any | | | | tender heartstrings of your reader--who, remember, |
| credit at all for the following advice and observations. | | | | will be a banker; A comprehensive financial |
| They come from a recent seminar I attended hosted | | | | statement; Two to thee months of bank |
| by Fidelity National Title in Novato, at which the guest | | | | statements; Current property tax statements; |
| speaker was Bill Gordon of TMG West. Although | | | | Estimated HUD-1. Then you submit it all to some "loss |
| based in Burlingame, California, TMG's website | | | | mitigation specialist" in St. Louis or Phoenix or |
| indicates that they're doing these all up and down the | | | | Orlando...and wait...and wait...and wait.... Last, there are |
| West Coast. Bill gave a seminar to a group of | | | | still risks on a short sale. I think most notable of |
| brokers and sales agents recently and he knows his | | | | these is the possible that you might get taxed on |
| stuff. He was kind enough to allow me to attend, | | | | the debt forgiveness. Because forgiveness of debt |
| and was even patient with me when I couldn't keep | | | | on a mortgage is legally considered ordinary income |
| my mouth shut a couple of times. Here's what I | | | | and is usually a taxable event, you could be liable for |
| learned from Bill. 1. Interview several agents and look | | | | income tax on the amount by which the outstanding |
| for one who has some experience doing them. They | | | | debt exceeds the value of the property at the time |
| are not easy to close, can take months and the risk | | | | of foreclosure. If you would like to read more about |
| of a having a deal fall out at the last minute can be | | | | this issue, I would suggest downloading IRS |
| significant. They are not for the feint of heart, the | | | | Publication 908. Would I do a short sale? No. I don't |
| impatient or someone who lacks really tight | | | | believe that the advantages of a short sale are |
| organizational skills. Don't hire an agent who has never | | | | worth the headache. Furthermore, who's bacon are |
| done one. Period. You're asking for serious trouble if | | | | you trying to save, yours or the bank's? The damage |
| you do. If you don't know how to find one, call the | | | | you have to do to your credit in order to even be |
| resident broker in charge of a reputable and large real | | | | considered for a short sale are substantial: Basically, if |
| estate agency and ask them. 2. Determine up front | | | | you haven't defaulted on your mortgage and gotten |
| whether or not you and your property fit the profile | | | | to the brink of losing it in foreclosure, you're not |
| of a possible success story or whether you're | | | | eligible. But if you have defaulted on your mortgage |
| wasting your time. You will have to be at least two | | | | and gotten to the brink of foreclosure, then your |
| months behind on the mortgage and have a signed | | | | credit is already trashed. There is no meaningful |
| purchase contract in hand before the lender will even | | | | difference between a short sale after a 90 to 120 |
| talk to you. That's a tall order for someone who's | | | | day default and a foreclosure or Chapter 7. By the |
| also stressed about the possibility of losing their | | | | time you're a candidate for a short sale, you've |
| home in foreclosure. So try to grasp that first point: | | | | already done as much damage to your credit as a |
| You must already be in default at least two to three | | | | foreclosure or bankruptcy. So what's the point? The |
| months before the bank will even consider your | | | | old saw about rearranging deck chairs on the Titanic |
| proposal. So if you're still current on your loan and | | | | comes to mind. Of course, your mileage may vary, |
| someone (maybe even a local real estate agent) has | | | | and there may be circumstances where it makes |
| called you up and made an offer to buy your condo | | | | sense to try it. But if I were going to do it, I'd pick |
| at way below market, you're still three to four | | | | up the phone and call an expert. |