Real Estate Short Sale
A short sale is the sale of mortgaged property where the lender actually agrees to take less for the property than what is owed on it, known as the loan balance. If there are 2 lenders, as in the case of an 80/20 loan, or where a home equity loan is in place, both lenders must agree on the deal.
To do this, you usually must be behind in payments, and have had the home property on the market for some time, this varies by lender. You must usually have professional help as well, in the negotiation process you will be trying to persuade the lenders that this home property is worth far less than the balance owed, and that the lender is better off taking the lower offer than to foreclose. There are real estate agents who are well versed in short sales these days, and other options available such as short sale specialists. Either way, professional help is far better than going it alone.
In a short sale there are various types of recourse, No, Limited, and Full. Recourse refers to what is done with the balance due after the property is sold.
No Recourse means that the lender writes off the entire balance remaining after the short sale. You may get a 1099 from lender, declaring this as income to you after the sale. Watch your Taxes.
Limited or Partial Recourse means that the lender writes off part of the loan, and you carry the rest in a new unsecured loan, or a new loan on a paid off auto, or whatever you may have that can be loaned on. Unsecured is best, it allows for a possible bankruptcy. You may also get a 1099 in this case.
Full Recourse means that the lender will take less than the balance due to sell the property, but they may come after you for the balance at any time. You may also get a 1099 in this case, and could end up in court as the lender tries to collect.
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