Let’s set the record straight.
A short sale is an elective procedure, and none of the parties involved are forced to participate. It has been a way, however, for underwater homeowners to have themselves removed from a very ugly weight; tens or thousands of dollars of inequity.
A nip there, a tuck there, what’s the harm? Any elective procedure comes with complications, so let’s highlight what the downsides are to “short sale surgery”.
1) Side Effects
Having a short sale done is much like having liposuction. You don’t want the extra weight there, you’ve done everything you can “naturally” to remove the unwanted mass, but it’s simply will never go away on it’s own.
So, an invasive tactic is used to get in there, take out what’s necessary, and trim the adipose down to a more normal level. There’s always risks though, and no two people or houses are alike.
For instance, electing to do a short sale could possible put the sellers in a worse condition financially. Like, if a Seller was considering doing bankruptcy, in which the house would have been included in their monthly expenses, it’s important to keep that costs on their balance sheet as part of a means test.
If suddenly that house is no longer an obligation, it could change their monthly expenses and overall financial picture to where they no longer qualify for certain types of bankruptcy, if at all.
If you’re a Seller and considering doing a short sale, perhaps bankruptcy, or both, it’s important to heed the advice of a qualified professional. This is NOT your local short sale agent; it’s also not an Attorney that will not simply advice you to declare bankruptcy to earn the fees. It’s working in tandem with two qualified, knowledgeable professionals that are not high-pressure salespeople. They’ll educate you so that you know your options, understand the “side effects” and can make the best decision for yourself.
This also applies to the tax situation. If you dwell in the property and do a short sale, the taxes may be treated differently then if it was an investment property.
This is important again to speak to a qualified tax professional that understands the ins and outs, reviews your financial overview, and can walk you through a procedure that will work best for you.
This is where it’s important to interview different professionals to help you with your short sale. If you were choosing a plastic surgeon to get a facelift or liposuction, certainly you wouldn’t pick the first one you saw. On the sames lines, you wouldn’t pick a random realtor to work with, or a friend of yours that just got your license and needs the commission.
Remember, this is your financial future, your tax returns, and your “personal procedure”. There are always risks, possible complications, and side effects with any elective proceedings, but with the right team and sounds advice, you can hedge your bets with solid information.
#2) You Get What You Pay For
On the other side of the spectrum, if you’re purchasing a short sale, how does this apply to you? The short of it is, not as much.
The bank(s) will issue an approval letter, which you can choose to reject, agree with, or counter. Along with price and closing date is a list of conditions that also must be met.
Some of them might be:
- You agree not to sell the house for xx amount of days (typically 30–90)
- You cannot sell the property for more than 20% of the purchase price during a certain time period
- You promise not to rent the house back to the owners (but may allow them to stay for a normal amount of time to move, typically 90 days)
- You are buying the property in as-is, where is condition. Meaning, the bank will fix nothing, update nothing, and provide no warranties. You want this beauty, you buy her like you see her.
So say you go on a date with someone who’s had plastic surgery – does it matter everyone knows or is it more important that they look wonderful? Similarly, if you bought the ugliest house on the block for $112,500 and everyone else’s house is worth $150,000, does it matter the modality of acquisition? Sure, there may be a couple bumps along the road and possible revisions, but the “surgery” the house/date had before really is of great benefit to you.
As much as plastic surgery is a billion dollar industry, so have millions and millions of dollars of inequity been erased and removed for US homeowners.
Knowing your options, selecting the best team, and understanding the risks will keep your financial future looking beautiful. Purchasing a short sale and understanding any caveats can land you a ugly duckling. And in both instances, no one ever has to know how your beautiful home underwent any nip/tuck.
What do you think?