Are "Short Sales" Worth the Hassle?

The latest craze around these parts (San Franciscomonths away from having any information on which
Bay Area)--at least with stressed out under-wateryou can really act or from really even being able to
homeowners and under-employed residential salespresent the deal to your lender. How long is that
agents--is the "short sale." A short sale is nothinglowball offer going to hang in there? Long enough for
more than a sale of a piece of real estate for lessyou to screw up your credit and set yourself up for
than the amount of the total debt secured by it. Thesuccess? 3. The lender will require you to provide,
concept is attractive, though the reality is significantlytogether with the signed purchase and deposit
less so. Whether it's worth the hassles and heartburnreceipt 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 gothree months of pay stubs; A hardship letter in which
through with trying to do this, here are someyou bare your soul and in an attempt to pluck the
thoughts and cautions... First of all, I don't take anytender 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 hostedstatement; Two to thee months of bank
by Fidelity National Title in Novato, at which the gueststatements; Current property tax statements;
speaker was Bill Gordon of TMG West. AlthoughEstimated HUD-1. Then you submit it all to some "loss
based in Burlingame, California, TMG's websitemitigation specialist" in St. Louis or Phoenix or
indicates that they're doing these all up and down theOrlando...and wait...and wait...and wait.... Last, there are
West Coast. Bill gave a seminar to a group ofstill risks on a short sale. I think most notable of
brokers and sales agents recently and he knows histhese 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 keepon a mortgage is legally considered ordinary income
my mouth shut a couple of times. Here's what Iand is usually a taxable event, you could be liable for
learned from Bill. 1. Interview several agents and lookincome tax on the amount by which the outstanding
for one who has some experience doing them. Theydebt exceeds the value of the property at the time
are not easy to close, can take months and the riskof foreclosure. If you would like to read more about
of a having a deal fall out at the last minute can bethis issue, I would suggest downloading IRS
significant. They are not for the feint of heart, thePublication 908. Would I do a short sale? No. I don't
impatient or someone who lacks really tightbelieve that the advantages of a short sale are
organizational skills. Don't hire an agent who has neverworth the headache. Furthermore, who's bacon are
done one. Period. You're asking for serious trouble ifyou trying to save, yours or the bank's? The damage
you do. If you don't know how to find one, call theyou have to do to your credit in order to even be
resident broker in charge of a reputable and large realconsidered for a short sale are substantial: Basically, if
estate agency and ask them. 2. Determine up frontyou haven't defaulted on your mortgage and gotten
whether or not you and your property fit the profileto the brink of losing it in foreclosure, you're not
of a possible success story or whether you'reeligible. But if you have defaulted on your mortgage
wasting your time. You will have to be at least twoand gotten to the brink of foreclosure, then your
months behind on the mortgage and have a signedcredit is already trashed. There is no meaningful
purchase contract in hand before the lender will evendifference between a short sale after a 90 to 120
talk to you. That's a tall order for someone who'sday default and a foreclosure or Chapter 7. By the
also stressed about the possibility of losing theirtime 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 threeforeclosure or bankruptcy. So what's the point? The
months before the bank will even consider yourold saw about rearranging deck chairs on the Titanic
proposal. So if you're still current on your loan andcomes to mind. Of course, your mileage may vary,
someone (maybe even a local real estate agent) hasand there may be circumstances where it makes
called you up and made an offer to buy your condosense to try it. But if I were going to do it, I'd pick
at way below market, you're still three to fourup the phone and call an expert.