Here is a good article on items that a seller needs to consider prior listing a short sale on their property.
While a Short Sale can be a better option than foreclosure, it does have some very distinct disadvantages. A Short Sale will effect your clients credit, although it will typically be viewed better than a foreclosure. Another disadvantage is that the IRS may
deem the difference between the sales price and the mortgage balance as
reportable income, especially if it is investment property. You
should encourage your client to consult a CPA or tax attorney prior to
deciding to do a short sale, as they may need to be prepared for an
additional tax burden. Clients should also realize that banks are not obligated to offer an owner a short sale. Different banks have different rules, and some may even require promissory notes from the client instead of eating the loss. Most
banks will require additional information about your client’s financial
situation before agreeing to a short sale, so your clients should meet
with a qualified financial planner to gather net worth statements, cash
flow statements, and other financial documentation to make their case
to the bank. An experienced Short Sale real estate agent is crucial to the process. You
and your team need to take the lead on coordinating with the bank and
the client’s other advisors such as their attorney, financial planner,
and CPA. Professional Real Estate Closers can
be a tremendous asset to this team. They are experienced with short
sales and bank negotiations and are willing to begin working with you
at the time of the listing to help collect the required documents. As daunting as this task can seem to you, imagine what your client thinks when considering a short sale. It’s imperative that you and your experienced team guide and coach the client through this complicated process. -Dennis M. Patrick, CFP®, ChFC®
