Our firm has been featured in the New York Times for our expertise in distressed property sales and consultations. In an article entitled The Roller-Coaster Ride Called A Short Sale by Vivian S. Toy, Ms. Toy writes about the ups and downs of the short sale process in New York City.
One of the most important statements in the article talks about how seller's must protect themselves from further financial exposure after a short sale closing. Ms. Toy correctly points out that "because lenders can always sue after a short sale for what is still owed on a mortgage, sellers are advised to ask their lenders to waive the right to sue. But even with a waiver, lenders will often try to make up some of what is owed, either by seeking a cash payment at the closing or a promissory note. Any amount that is forgiven can be considered income by the Internal Revenue Service."
How we deal with this issue differentiates our firm from other real estate firms. As part of the short sale process we always negotiate a written release of further liability against the homeowner. This can be easily missed by less experienced short sale negotiators. In their haste to close the deal, they do not realize that any release of liability must be in writing.
We take pride in the work we do for our clients.
Showing posts with label real estate brokerage. Show all posts
Showing posts with label real estate brokerage. Show all posts
Thursday, August 19, 2010
Monday, March 8, 2010
Short Sales In NYC : What Is A Short Sale?
New York City is not immune to the real estate downturn. A recent article by the Real Deal put a spot light on troubled condos in Manhattan. These homes are in foreclosure. To quote the writer, Sarah Riley, she says: “This predicament isn't playing out in some outer-borough neighborhood. It's happening in Manhattan.” In fact, on April 5, 2010, the US Treasury Department is launching a program in an effort to streamline and reduce the delays for approving short sales. The plan requires a short sale approval or denial within ten (10) days and it forgives the borrower from the entire debt. (forgiven debt can be considered taxable income).
A Short Sale is a good strategy for a property that is “upside down”. In other words the outstanding mortgage balance is greater than the value of the property. While there is a focus on homeowner's primary residence, a short sale is a viable strategy for investment and commercial properties.
What Is A Short Sale?
There are some lenders willing to accept less than the full amount due on a mortgage loan. This is commonly referred to as a “short sale.” Generally, a buyer will be willing to purchase the property from a seller at a "short sale" amount. The benefit to the seller is that it ends the foreclosure process. It also keeps further derogatory information from being placed on the credit report. A lender must approve a short sale in writing before a property can be sold. A lender benefits from a short sale because it can minimize its losses in a falling market.
The lender will want financial information from the owner/borrower, information about the property, and the exact terms of any short sale deal. The lender needs to see a written contract between the owner and the buyer to make sure the owner isn’t walking away with any cash from the deal. However some lenders may allow a payment of moving expenses to a seller. The lender will appraise the property. They may also request a listing agreement from a licensed broker. A listing agreement tells the bank that the owner tried to sell the property.
Keep in mind that if a lender agrees to accept less than what is owed there can be a tax on the difference or it can become a deficiency judgment. For example, if a property owner owes the lender $400,000 and the lender agrees to let the property owner sell the property for $350,000, the property owner can be taxed on the $50,000 difference or face a judgment.
It is important to consult with a qualified tax professional when it comes to the financial and legal impact of using a short sale. I work with several trusted attorneys and accountants.
If you have any questions email me at: Gordon@luxornyc.com.
A Short Sale is a good strategy for a property that is “upside down”. In other words the outstanding mortgage balance is greater than the value of the property. While there is a focus on homeowner's primary residence, a short sale is a viable strategy for investment and commercial properties.
What Is A Short Sale?
There are some lenders willing to accept less than the full amount due on a mortgage loan. This is commonly referred to as a “short sale.” Generally, a buyer will be willing to purchase the property from a seller at a "short sale" amount. The benefit to the seller is that it ends the foreclosure process. It also keeps further derogatory information from being placed on the credit report. A lender must approve a short sale in writing before a property can be sold. A lender benefits from a short sale because it can minimize its losses in a falling market.
The lender will want financial information from the owner/borrower, information about the property, and the exact terms of any short sale deal. The lender needs to see a written contract between the owner and the buyer to make sure the owner isn’t walking away with any cash from the deal. However some lenders may allow a payment of moving expenses to a seller. The lender will appraise the property. They may also request a listing agreement from a licensed broker. A listing agreement tells the bank that the owner tried to sell the property.
Keep in mind that if a lender agrees to accept less than what is owed there can be a tax on the difference or it can become a deficiency judgment. For example, if a property owner owes the lender $400,000 and the lender agrees to let the property owner sell the property for $350,000, the property owner can be taxed on the $50,000 difference or face a judgment.
It is important to consult with a qualified tax professional when it comes to the financial and legal impact of using a short sale. I work with several trusted attorneys and accountants.
If you have any questions email me at: Gordon@luxornyc.com.
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