Short Sales Las Vegas

What is a lender’s net sheet?
A lender’s net sheet is a document that shows a lender what it will receive as a result of a short sale, and it is usually presented side-by-side next to what it would receive if it proceeded with a foreclosure. A HUD-1 can be presented instead of a net sheet. A HUD-1 is a document prescribed by HUD under then Real Estate Settlement Procedures Act which itemizes all charges imposed upon a borrower and seller for a real estate transaction. It gives each party a complete list of their incoming and outgoing funds.

Are there any special features in a short sale purchase agreement?
You need to ensure there is a clause stating the agreement is contingent on lender acceptance, and the seller has no liability or penalties in the event it is not accepted. As a seller you want to make it clear that all brokerage fees, and other costs such as repairs, are to be paid by the lender or buyer and that the seller has no obligation in this regard.

What should I attach to the hardship letter?
If you have other judgments or liens against you these should be included along with all outstanding bills such as medical bills. If you have unemployment or disability benefits these should be included.

Do I need to have missed loan payments to secure short sale approval from my lender?
If you have not missed any mortgage payments then it will be difficult to support a claim of hardship. The lender will make a decision based on whether they would be better keeping you as a borrower and possibly having to foreclose, or better allowing the short sale. Foreclosures are usually more expensive for lenders, but if you have not missed a payment then they will not consider a foreclosure likely in the short term, and thus your short sale will probably be denied.

It would not make sense just to support a short sale. If you have other assets and good credit you would not be able to provide the financial hardship data to support the short sale.

Can I really get paid to do a short sale?

Lenders recognize that a short sale is to their benefit and in certain circumstances it makes sense for them to pay an incentive to their owners to do a short sale. Chase bank has sent letters to owners offering them as much as $30,000. Other programs offering incentives include HAFA, Bank of America Cooperative Short Sale Program, TAP, and short sale incentives offered by such banks as Citi, Wachovia, and Litton Loan Servicing.

Can I sell personal property along with the home?
You can sell your personal property separately through a bill of sale, however, as this is not disclosed on the HUD-1 it may be fraud. Because the seller is in control of which offer to present to the lender there is a clear conflict if they are also selling personal property that does not benefit the bank. In competitive markets buyers may be asked to overpay for personal property to have their offer presented to the bank – this is not ethical and depending on the circumstances may be outright illegal. You should present the offer that is most likely to be accepted by the bank, irrespective of personal property issues.

Are there any tax implications to a short sale?

Tax laws are constantly revised, but generally speaking the IRS considers forgiven debt as taxable income, and if your lender issues a 1099-C tracing this then it will be easily identified by the IRS. Even when your lender does not report the debt forgiveness it can be tracked.

IRS Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, allows you to record insolvency at the time the debt was forgiven, which may release the obligation to pay tax on it.

In 2007 the Mortgage Forgiveness Debt Relief Act was passed to allow up to $2m of debt to be forgiven on a tax payer’s primary residence. If a borrower refinanced the debt then forgiveness is limited to the principal balance of the original loan at the time of the refinancing.

Why do you need to let the lender know the estimated repairs in a short sale?

When banks approve a short sale they want to know what their net return will be at the sales price. The best way to do this is to reduce the price by the estimated cost of known repairs and explain this differential to the bank at the time the request for offer approval is made. Another path is to price the home fully, but let the bank know what you estimate may be reduced following a home inspection by the buyer.


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