7 Fundamentals of Short Sales and NJ Real Estate

What you need to know about NJ Real Estate short sales and how they are done

A short sale is a sale of Real Estate in which the gross sales price falls short of the balance needed to satisfy all liens secured by the subject property. This often occurs when the borrower cannot pay the mortgage loan on their property and the lender decides that it would be more beneficial to sell the property at a reasonable loss rather than foreclosing which can incur many fees on the bank and further damage the borrower’s credit. The qualifications for a short sale vary slightly from the traditional listing. The primary difference is that in order for a bank to acknowledge a short sale, the borrower must be able to demonstrate a viable economic hardship. The most important component to servicing a short sale is to make sure that you work hand in hand with a reputable and highly accredited loss mitigation team. Loss mitigation is the process of negotiating the short sale and minimizing the losses on behalf of the homeowner who is applying for the short sale. The loss mitigator will act as the homeowner's authorized negotiator and facilitate all aspects of the short sale and focus on minimizing the homeowner’s losses and fees. Losses may include the unpaid debt settlement, unpaid property tax, income tax obligations and Real Estate commissions. Throughout the short sale process, the loss mitigation team will work closely with their title company to ensure that any additional judgments and liens are discharged and that pending Sherriff sale dates are postponed to prevent a foreclosure by the bank. The title company is vital to the short sale process because they will be able to run title searches throughout the negotiations and their closing agent can arrange the closing after the short sale approval is issued.

The following is the 7 step qualification process for NJ Real Estate short sales:

  1. The homeowner must be 30 days delinquent on their mortgage.
  2. The homeowner must be able to prove acceptable financial hardship. Examples of this can include: job loss or, mandatory job relocation property damage, death of spouse or family member, business failure, divorce or separation, severe illness or medical bill expenses, incarceration, military service, mortgage adjustment and tax or insurance increase.
  3. It is important to find an experienced Realtor specializing in NJ Real Estate short sales.
  4. Contact a NJ Real Estate loss mitigation company.
  5. Consult with a NJ Real Estate attorney.
  6. Keep regular contact with all parties including your personal loss mitigator, Realtor and attorney.
  7. Discuss tax ramifications with an accountant familiar with short sales and NJ Real Estate. Also, in 2007, The Mortgage Debt Relief Act was introduced and generally allows taxpayers to exclude their income from the release of debt on their primary residence. This provision applies to debt forgiven from the years 2007 through 2012.