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