Short sales in Brooklyn are used by homeowners to prevent losing their homes to foreclosure.  When you see an advertisement for a short sale, the home is in pre-foreclosure.

What is a short sale? It is an agreement between the sellers of a home in the beginning stages of foreclosure and their lender which allows the home to be sold for less than the existing loan balance. If an agreement is reached by all parties, a short sale could save the sellers’ credit by avoiding a foreclosure.

A short sale is not a short process, however.  It is a lengthy process with many legal and financial aspects.

The basic short sale process flows as follows:

• The seller contacts the lender to discuss the possibility of a short sale.
• The seller issues a letter authorizing release of the loan and property information to the buyer or escrow agency.
• A settlement statement is reviewed by the lender. The statement includes the proposed selling price, the amount left to be repaid and itemized expenses.
• The seller completes a hardship letter for short sale in Brooklyn, including a description of all the financial difficulties the seller is going through.  The lender validates and confirms all financial difficulties.
• The seller provides the financial documents including paycheck stubs, bank statements, a personal financial statement, monthly budget assessment and anything else required by the lender.
• Once approved, the buyer can proceed with the purchase.

What are the benefits of a short sale?  The seller is relieved of the debt they cannot afford, a foreclosure proceeding by the lender is avoided and the buyer purchases the home at a discounted price.

Whether you’re a seller who is interested in selling your home as a short sale or a buyer who wants to purchase a short sale in Brooklyn, I can help. Please call Charles D’Alessandro of Fillmore Real Estate at (718) 253-9600 ext 206 or email me at [email protected].

There’s a lot of confusion surrounding short sales, so I thought I’d answer some of the questions I’ve received from clients, owners of Brooklyn real estate and blog readers.

Q:  What is a short sale?

A:  A short sale is when a lender agrees to accept less than what is owed on a home.  For example, you owe $300,000 on your home loan, but your lender will allow you to sell your home for $250,000.

Q:  Who makes up the difference between the short sale price and the amount owed?

A:  In the past, the owner of the Brooklyn real estate would receive a 1099 income statement at tax time.  The “forgiven amount” would then be counted as income subject to income tax.  This left homeowners in debt to the federal government for the tax owed on that amount.  Now, with the passing of the Mortgage Forgiveness Debt Relief Act and Debt Cancellation, the short fall on a primary residence is not counted as income.  This eases the financial hardship of those who are already struggling.

Q:  Does a short sale impact your credit the same way as a foreclosure?

A:  No, the impact of a short sale is milder on your credit than a foreclosure.  Short Sales usually reduce your score by about 80 to 250 points and only stay on your record for around 5 years.  Compare that to foreclosures which reduce your score approximately 250 to 400 points and remains on your record for 10 years.

Q: How do I qualify for a short sale on my Brooklyn real estate?

A:  Contact your lender as soon as you know you are in financial trouble.  Government programs, particularly the Home Affordable Foreclosure Alternatives (HAFA), are designed to make short sales more attractive to lenders by giving them incentives for allowing a short sale over a foreclosure.  However, if you allow your loan to become delinquent (more than 60 days), lenders are less likely to grant a short sale.

Q:  Can I sell my home as a FSBO and still qualify for a short sale?

A:  No.  Lenders rely on “broker opinion” as to what the home is worth at this time.  You need to hire a real estate professional that has experience with short sales.  Short sales take longer to close and properly handling the sale can make a difference in getting an offer accepted by your lender.

If you are facing the possibility of foreclosure and  looking for an experienced, energetic, resourceful  Brooklyn real estate agent , let me help you discover the options that are available to you. Give me Charles D’Alessandro your Brooklyn Realtor® with Fillmore Real Estate a call at (718) 253-9600 ext.206 or email me at [email protected]