Thinking Short Sale...Consult a Tax Accountant and Attorney First

In today's Rreal Estate market many people are considering short sale for a variety of reasons. Realtors are taking listings and trying to get banks to approve short sale transactions. But what are the ramifications to doing a short sale? No Realtor is an expert on what the ramifications can be in regards to a short sale.

By definition a short sale si when the home oneer sells the home for less than they owe on the house. The banks are requiring quite a bit of information in order to process and decide whether they will accept a short sale.

I go one quite a bit of short sale presentations lately. In this market it seems almost half of the homes on the market are short sale listings. But what are the ramifications if the seller accepts a short sale and the bank approves it. There can be numerous liabilities attached to that transaction for the seller. Their obligation and ramifications may not be over when they sign the deed over to the new home owner.

I have made it a policy to NOT accept any short sale listing without the seller first consulting an attorney and a tax accountant about the possible ramifications of a short sale. It has cost me some listings on a short sale but I feel the home owner is making a more educated decision in regards to what the effects can be.

The premise that a lot of home sellers seem to be under si that if they short sale their liability is gone. that may not necesary be true. The bank can request the seller to take a promissory note for the dfiffeence of sale price and the mortgage balance.

Other possibility I have seen is the bank will issue a 1099 at the end of the year claiming the short sale deficiency as income to the seller. Thus the seller has to pay taxes on that amount.

There are other ramifcations as well. I am by no means an expert in the psosible consequences. These seem to be the two most common misconceptions that a seller is unaware of when considering a short sale.

So, please if you are considering short sale on your home consult a tax accountant and an attorney before signing any papers on proceeding with a short sale.

Dave diCecco

Realtor/Agent

www.davedicecco.com