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Thank you for visiting my Maui "Short Sales " page.
If you are searching for Homes or Condos on Maui that are below the current market value, please contact me and I will help you to the best of my abilities. I have the resources! Call
Fabienne Gandall at 808-280-8167
fabienne@RelocateOnmaui.com
Buying properties declared "Short Sales" !
There is a lot of interest in buying "Short Sale" properties these days. A lot of information, some good and some bad, is floating around about the subject. Often the information offered is for sale, with the promise that you can make a lot of money with little effort once you know “the secret formula”.
The fact is that there are no secrets, and to make money does require effort.
What is a “Short Sale”?
A “short sale” is a term that is commonly used when a property is sold for an amount which is insufficient to pay the existing liens, encumbrances and costs associated with the sale of the property. The seller is often said to be “upside down” in the property.
The Scenario: The current market value for the property is $400,000.00. Closing costs are estimated to be $40,000.00 and the current balance on the loan secured by the property is $390,000.00. The sale proceeds will be insufficient to meet the seller’s obligations at closing by $30,000.00.
Possible Solutions: Seller can deposit the additional $30,000.00 required into escrow at closing or the seller can contact the existing lender to determine if the lender is willing to reduce the amount required to release their lien from the property.
Contacting the Lender: Seller should contact the existing lender to determine the documentation required to start the “short sale” approval process and the amount of time necessary for the lender to provide a preliminary determination, once the seller has provided the required documents.
The Purchase Agreement: The lender may not provide final approval for the short sale until the seller has entered into a purchase agreement with a prospective buyer and seller’s acceptance of this agreement shouldbe contingent upon the successful negotiations with seller’s existing lender to reduce the amount required to release the lien of record.
The Escrow: If the short sale is approved, the lender will provide the escrow holder, upon request, with a written statement reflecting the amounts required to release the lien of record and any final conditions which must be met before the lender will authorize the escrow to close.
Possible Lender Conditions: The lender may require the seller to sign an unsecured note for any additional amounts required to pay the loan in full with payments to be made by seller after the close of escrow. The lender may require the seller to assign to lender, any refund due on any existing hazard insurance policy being cancelled or any remaining balance in seller’s impound account.
Tax Consequences: The seller should contact a tax attorney or certified public accountant to determine the tax consequences of participating in a short sale.
Warning: Short sales often present challenges which go far beyond the possible tax consequences. It is strongly recommended that all parties seek the additional legal advice from a qualified real estate attorney before participating in such a transaction.
This Guide to Short Sales was provided by Old Republic Title Corporation of Hawaii.
The Pitfalls Of The Short Sale -by Alan Zukerkorn (Hawaii Mortgage)
The Short Sale. The new buzz word and opportunity for homeowners trying to dump their property for less than what is owed, is not the panacea for everyone. Yes they can be done, but it is in no way an easy proposition. One must take into account that a Short Sale is an “Open” negotiation to purchase property, and every aspect of the transaction is open to negotiation. Be aware that a Short Sale is nothing more than a negotiation to release the mortgage lien from the property so that title can be transferred. Here are some of the truths that sellers and buyers should be made aware of when considering this type of transaction.
1) A negotiated Short Sale could take several months for a lender to approve. With interest rates expected to only go up, some buyers might not want to wait.
2) The lender can counter the offered price and also stipulate that the buyers pay fees not customary with Hawaii transactions. These fees could include the buyer paying back property taxes, back HOA fees, paying commissions, and paying all of the Escrow and Title fees.
3) Once the lender approves the Short Sale, their terms might not be acceptable to the buyer. After waiting two months for the lender to approve a short sale, a buyer just cancelled their transaction because the lender required the transaction close in 30 days. The husband was out of the country and they would not be able to close in the required time frame.
4) A short sale does impact the seller’s credit rating. Depending on the payment history of the seller with their current loan, upon completion of the short sale the lender will report the mortgage to the credit bureaus differently. Deed In Lieu Of Foreclosure is one step up from foreclosure and is issued if the seller has stopped paying the mortgage during the short sale period. Paid In Full For Less Than The Full Balance will be issued if the seller has continued to make all payments on time. This rating will still have a major impact on one’s credit, and affect their ability to get another mortgage.
5) Upon completion of the short sale, the lender will issue a 1099-C and submit it to the IRS. Sellers should consult a tax professional to determine their individual impact.
6) Last, but maybe the most important item a seller needs to know is that the lender may and can require the seller to sign a separate promissory note to cover any shortage of what is owed to the lender.
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