Fannie Mae recently announced that sellers who elect to sell on a short sale instead of letting the property go through to final foreclosure are eligible to buy a new home after two years. Although there are no exceptions due to extenuating circumstances, this new ruling means there is finally a logical reason to do a short sale now.
What is a Short Sale?
Wikipedia does a great job explaining what a Short Sale is:
In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.
Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market climate and the individual borrower’s financial situation.
A short sale typically is executed to prevent a home foreclosure. Often a bank will choose to allow a short sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, the advantages include avoidance of having a foreclosure on their credit history. Additionally, a short sale is typically faster and less expensive than a foreclosure.
What Can a Short Sale Do For a Homeowner in Trouble:
- Preserve credit rating
- Allow WNY home owner to sell without any out-of-pocket expenses
- Eliminate negative CASH flow
- Reduce tax liability
- Avoid potential foreclosure and possible bankruptcy
- Release of mortgage obligation
- Relieve financial and emotional stress
As a New York State Realtor, I am not licensed as a lawyer or a Certified Public Accountant and cannot advise you on these matters. Be aware: according to the Mortgage Forgiveness Debt Relief Act of 2007, the I.R.S. could consider debt forgiveness as income, and there is no guarantee that a lender who accepts a short sale will not legally pursue a borrower for the difference between the amount owed and the amount paid. It is important to speak with your attorney and accountant to find out the ramifications of a short sale to you.
How About One Of These Homes?
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All statistics are gathered from the Buffalo Niagara Association of REALTORS®.
For more information – call our Myriad Team @ Keller Williams Lancaster at: (716) 650-0051
Thinking of selling your Western New York home? Interested in finding out the current market value of your single family home, condo or investment property? Then call us at (716) 650-0051 to discuss what is happening in today’s Western New York Real Estate Market. We would be happy to give you a personalized Comparative Market Analysis for your home or assist you to purchase a home.
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