Short Sales in Connecticut - Trying to Avoid Foreclosure?
Do You Need Help Trying to Sell Your House in Connecticut?
Are Short Sales Common? Short sales in Connecticut are becoming a relatively common occurrence. According to realty data company RealtyTrac, short sales have represented over 10% and in many months 15% of home sales transactions in Connecticut (while foreclosures account for between 3% and 5% of transactions in coinciding months).
What is a Short Sale? A short sale is a real estate transaction where the lien holder(s) of a property – typically the bank holding a mortgage – agrees to accept less than the amount owed on the property, in satisfaction of the lien.
How Does a Short Sale Work? There are a few things to understand about short sales, the first is that the bank doesn’t have to approve the transaction. Typically an attorney or other representative of the buyer has to supply the bank with documentation demonstrating the inability of the seller to satisfy the terms of their loan (i.e. the seller’s income/asset/debt statements, bank statements, tax returns, employment information, hardship letters, etc). The bank will do its own research on the property to confirm that the proposed sale price is justified. The bank will have a local real estate agent complete a BPO (Broker’s Price Opinion), which acts as the equivalent of an appraisal for the purpose of the short sale.
If the sale price is justified, and the bank believes that the likely alternative of the short sale is ultimately a foreclosure, the bank may well approve the transaction.
What Else Happens in a Short Sale? A short sale can have several impacts, including remaining debt, tax events, and credit repercussions.
In Connecticut, lenders are allowed to hold a debtor responsible for any deficiencies due following a short sale. If possible, a debtor will want to seek a release of financial liability in a short sale. Additionally, any debt that is forgiven may be seen by the IRS as taxable income, triggering tax liability for the selling homeowner. There are also the impact to one’s credit from a short sale, though far less severe than the impact of a foreclosure or bankruptcy.
All of these factors are compelling reasons to seek the assistance of short sale specialists, that have experience negotiating short sales.
