The Short Sale – The Good, The Bad & The Ugly Of Hidden Gems

I recently helped a buyer find a great bargain here in a downtown Blacksburg location.  The home had been on the market for a while – not a terribly long time, but long enough that just about any buyer would start getting antsy.   The property had it all – old Blacksburg charm & character, a large downtown lot, and STUFF.  Lots of stuff.  As in, stuff piled everywhere on top of stuff.  And in the outside shed?  STUFF. 

This buyeThis_tallr was patient, we made a cash offer with a very quick escrow period, and during negotiations found out the owner owed more than we had offered.  In other words, she was upside down.  Everyone wants a deal, and in this case my client found a rock-bottom Blacksburg bargain – a Short Sale.  We explained the terms of our offer, and it became readily apparent that the owner was in pre-foreclosure.  Essentially, there were issues – whether they were late payments, an impending bankruptcy, etc. – that were keeping the owner from fulfilling terms of the loan.  The home had been on the market at various prices, but all were at prices higher than market value and things were certainly getting scary.  A foreclosure can really damage credit rating, and create a real financial burden in the future. 

It was at this point that the owner and their agent suggested a Short Sale to the lender.  Our offer was presented to the lender, as the lender had suggested they would be calling the loan in the very near future.  By presenting it directly to the lender, the lender can choose to accept a sales price lower than the amount of the loan, but this amount will often be MUCH less than what it would have cost the lender to foreclose.  The advantage here to the owner was that their credit rating took a minimal hit instead of a big, nasty smashing. 

A Short Sale is not easy – it involves the lender deciding whether or not to sell the home or foreclose, and adds mounds of dead trees to the transaction.  Properties are sold in "As-Is" condition, meaning there are no inspections (or at least no repairs being made), and the lender holds no responsibility to the condition of the property.  It’s a risky proposition from the perspective of the buyer, but it’s one that can pay off in a big, big way.  And from a seller’s perspective, the home gets sold!  There are some things to consider, however, particularly for the seller.  First –  and this is very important – the forgiven debt is taxable income.  In other words, if the difference between the sales price and loan amount is $50000, that $50000 is taxable – and rest assured Uncle Sam knows you sold the property.  Also, don’t forget that your credit will take a hit, so spend some time after the dust settles cleaning things up and getting everything back in order.  It’s frustrating, but much better than having to do it after a foreclosure.

If you’re a buyer in the market looking for great bargains and don’t mind putting a little sweat and financial equity into it, email me and let’s talk.  There might be a Short Sale, Bank-Owned, or HUD property just waiting to be uncovered.

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