Short Sales





A short sale in real estate means that the property sells for less than the total amount due on the underlying mortgage or mortgages.  Not all sellers and not all properties qualify for a short sale.  It is important to work with a qualified Realtor, attorney and tax adviser.

If you're the buyer, a short sale could equate to a “good deal” and be worth the pursuit but there may be drawbacks.  As a starter, you must be patient.  Depending on the seller's cooperation and the lender's response time, a short sale purchase could be long and drawn out.  At Oceanfront Realty, we have Short Sale Realtor Specialists ready to help you get the good deal you're looking for and to assist you through the entire process.  Contact us at Sales@OceanfrontRealty.com  or call us on Kauai at 1 800 222-5541.

If you're the seller, you do not necessarily need to be behind in your payments for your lender to agree to a short sale.  To qualify for a short sale, lenders generally look for a “yes” answer to all of these 4 questions:

  • Has the home's market value dropped?
  • Is the mortgage in or near default status?
  • Has the seller fallen on hard times?
  • Does the seller have no other assets to pay the shortfall?

Examples of hardship are unemployment, divorce, sudden medical emergency, bankruptcy or death.  It is NOT a hardship if the seller wants to buy another home or if seller is increasing the size of his/her family.

If the property and the seller qualify for a short sale, these are the typical steps in a successful short sale:

  • Seller signs a Listing Agreement with a Realtor subject to selling as a short sale with underlying lender approval.
  • The Realtor finds a buyer who makes a reasonable written offer for less than what is owed on the property.
  • The seller accepts the negotiated offer which now becomes a purchase contract subject to underlying lender approval.
  • Seller submits the purchase contract and substantial other information to the underlying lender/s who accept it.
  • The transaction successfully closes when, through escrow, the buyer delivers the total funds, the lender/s release the underlying lien or liens, and the seller delivers the deed.

The seller must be prepared to submit to the underlying lender/s a financial statement showing all assets and liabilities, copies of the last two years' tax returns, recent pay stubs if any, recent bank statements and more.

Provided the seller has sufficient income or other assets, the underlying lender may ask for cash or a Note before agreeing to the short sale or the lender may pursue a deficiency judgment.

If there is debt forgiveness, the underlying lender/s may issue a 1099 to the seller for any deficiency which could result in tax consequences, although some situations are exempt according to the Mortgage Forgiveness Debt Relief Act of 2007. 

While a short sale itself does not show up on a seller's credit report, a short sale could be reported to credit reporting agencies as “Paid in Full for Less Than Agreed.”  Short sales are frequently considered the lesser of two evils over a foreclosure; however, short sales can affect one's credit ratings.

Always consult your attorney and tax adviser before proceeding with a short sale and work with a knowledgeable Realtor.  At Oceanfront Realty, we have Short Sale Realtor Specialists ready to “hold your hand” and assist you through the entire process.  Contact us at Sales@OceanfrontRealty.com or call us on Kauai at 1 800 222-5541.

A short sale in real estate means that the property sells for less than the total amount due on the underlying mortgage or mortgages.  Not all sellers and not all properties qualify for a short sale.  It is important to work with a qualified Realtor, attorney and tax adviser.

If you're the buyer, a short sale could equate to a “good deal” and be worth the pursuit but there may be drawbacks.  As a starter, you must be patient.  Depending on the seller's cooperation and the lender's response time, a short sale purchase could be long and drawn out.  At Oceanfront Realty, we have Short Sale Realtor Specialists ready to help you get the good deal you're looking for and to assist you through the entire process.  Contact us at Sales@OceanfrontRealty.com  or call us on Kauai at 1 800 222-5541.

If you're the seller, you do not necessarily need to be behind in your payments for your lender to agree to a short sale.  To qualify for a short sale, lenders generally look for a “yes” answer to all of these 4 questions:

Has the home's market value dropped?
Is the mortgage in or near default status?
Has the seller fallen on hard times?
Does the seller have no other assets to pay the shortfall?

Examples of hardship are unemployment, divorce, sudden medical emergency, bankruptcy or death.  It is NOT a hardship if the seller wants to buy another home or if seller is increasing the size of his/her family.

If the property and the seller qualify for a short sale, these are the typical steps in a successful short sale:

Seller signs a Listing Agreement with a Realtor subject to selling as a short sale with underlying lender approval.

The Realtor finds a buyer who makes a reasonable written offer for less than what is owed on the property.

The seller accepts the negotiated offer which now becomes a purchase contract subject to underlying lender approval.

Seller submits the purchase contract and substantial other information to the underlying lender/s who accept it.

The transaction successfully closes when, through escrow, the buyer delivers the total funds, the lender/s release the underlying lien or liens, and the seller delivers the deed.

The seller must be prepared to submit to the underlying lender/s a financial statement showing all assets and liabilities, copies of the last two years' tax returns, recent pay stubs if any, recent bank statements and more.

Provided the seller has sufficient income or other assets, the underlying lender may ask for cash or a Note before agreeing to the short sale or the lender may pursue a deficiency judgment.

If there is debt forgiveness, the underlying lender/s may issue a 1099 to the seller for any deficiency which could result in tax consequences, although some situations are exempt according to the Mortgage Forgiveness Debt Relief Act of 2007. 

While a short sale itself does not show up on a seller's credit report, a short sale could be reported to credit reporting agencies as “Paid in Full for Less Than Agreed.”  Short sales are frequently considered the lesser of two evils over a foreclosure; however, short sales can affect one's credit ratings.

Always consult your attorney and tax adviser before proceeding with a short sale and work with a knowledgeable Realtor.  At Oceanfront Realty, we have Short Sale Realtor Specialists ready to “hold your hand” and assist you through the entire process.  Contact us at Sales@OceanfrontRealty.com or call us on Kauai at 1 800 222-5541.




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