Most homeowners are unfamiliar with the concept of a short sale, so you may need to give them a crash course on this process.
The lender will not consider a short sale unless there is no equity and the seller can not repay the loan balance. The lender may require the seller to demonstrate that previous attempts to sell the property have failed.
The seller cannot receive any money from the proceeds in a short sale. Sellers may also be responsible for taxes if the lender sends them a form 1099. Explain to the seller that the difference between the loan balance and the amount received in the short sale may be declare as income on their income tax return.
Remember that some states allow deficiency judgments. This allows the lender to pursue the borrower for the difference between the loan balance and the proceeds received from the short sale. It’s important to note however, that a normal short –sale agreement requires the lender to forgive the difference and waive its right to pursue a deficiency judgment.
When faced with a short-sale proposition, the lender will be demanding. The seller should be prepared for this. A mountain of documentation justifying the seller’s request must be submitted.
The seller should always seek advice from his accountant and attorney before proceeding with a short sale.