Apr 24, 2008
Short Sales Of Homes – A New Thing In U.S. Real Estate
U.S. real estate has been seeing sea changes over the couple of years lately. MLS listings, FSBO category and flat-fee brokerage listings carry advertisements of housing properties for sale, continuously for more number of months because of the soft market. Home sellers who have mortgage loans to be cleared and move out quickly have been offered a new option of “short sales” in consultation with their mortgage lenders.
The mortgage lenders who are anxious of getting back their loan amounts will be willing to help the barrower-home owners in resorting to this short sales option. What happens is if the market price of the property goes down below the loan existing on it, the lenders can waive the difference between the sale price and the actual loan.
As the market price of housing properties are coming down in many parts of the country, the home owners are in a fix to get out of the situation by selling their homes even at a price less than its fair value and clear off the mortgage loan. They have to work out this solution with the lending institution for handing over the sale proceeds of the property and get the forgiveness of the balance amount of loan, if any.
In this context, the Mortgage Debt Cancellation Relief Act, which has become a law in U.S., last December is a welcome measure. According to it, the distressed home owners get relief to the extent of tax rebate. The federal taxes will not be levied on the amount of loan forgiven by the mortgage lenders up to $2 million. But this is applicable for home owners who had obtained loan for owning their property for living and not as an investment. Earlier this was not so and the entire sale proceeds of the property was taken into account for taxable income.
The mortgage lenders are also benefited because, if the barrower defaults repayment, they have to initiate foreclosure process to dispose of the property through public auction to get back whatever they can against the defaulted loan. This is cumbersome and a lot of properties are lying under foreclosure through out the country. These properties are dead-stocks in the books of the lender, incurring loss of interest everyday on their capital invested and also warrant further spending of money towards their upkeep and maintenance.
The home-buyers searching MLS listings, FSBO category and flat-fee brokerage listings can also go for these short sales, where a good bargain is there. To thus extent, short sales are a new phenomenon in U.S. real estate containing advantages for all – home owner, mortgage lender and home buyer.
