What is a Quick Sell?

In real estate, a short sale is when a bank or mortgage lender agrees to discount a loan balance due to an economic hardship on the part of the mortgagor. The home owner sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale. A short sale is done to prevent a home foreclosure - a bank will choose to allow a short sale that will result in a smaller financial loss than foreclosing. For the home owner, the advantages include avoidance of having a foreclosure on the credit history. Also, a short sale is typically faster and less expensive than a foreclosure.

Lenders have a loss mitigation department which deals with short sale transactions. Typically, lenders do not accept short sale offers or requests for short sales until a Notice of Default has been issued or recorded. Lenders have to approve of any buyer’s or listing agent’s commission in advance. Junior liens may need to approve of the short sale. Frequent objectors to short sales include tax lieners and mechanic’s lien holders.

It is common for a lender to omit updating the zero balance and settlement option on the mortgagor’s credit report, or even flat refuse to do so “due to their financial loss.” The forgiven amount is considered as income for the borrower and as such liable to be taxed. However, after the signing of The Mortgage Forgiveness Debt Relief Act of 2007 by President Bush, amendments have been made to remove such tax liability and allow the borrower and lender to work freely together to find a solution beneficial to both parties. This protection is limited to primary residences so consult with a tax advisor to ensure you qualify.

What happens if you sell your house below payoff?

I am just wondering how the rest of the ends get tied up if I have to sell my house for less then I owe? I have to sell my house because renting it out would cost a lot in property management and higher insurance rate due to a pool. So if I sell the house below what I owe between two mortgages how does that work?

You can pay off a house with less money than you actually owe. It’s known as a ’short sale’ and you can negotiate one with your bank or mortgage company. They would rather take a short sale than let you go into foreclosure, because foreclosures have the potential to be disastrously expensive for a bank. Ask your bank what steps you need to take in order to work this one out, and make it obvious that you are doing the best you can to be honest with them about your situation.