Andrew Koenig wrote:

- quote -

I stand corrected.
Upside Down = owing more than one's home's current potential selling price.
Short sale = When bank accepts a sale price less than their mortgage and
lets buyer off the hook for any difference.

As far as any tax due on the difference to the seller, Tad pointed out a
change in the law. Here is an article published a couple weeks back;
http://www.fairmark.com/news/07122101-mortgage.htm
JOE

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:vJKdnYsNccRUlB3anZ2dnUVZ_vzinZ2d[at]comcast.com...

- quote -

I don't think that's quite right. I think the term "short sale" applies
when the sale price is less than the current mortgage *and* the mortgage
holder has agreed to accept less than the full balance to pay off the
mortgage.

I know someone who sold a house at a loss and had to come up with $20K to
pay off the balance of the mortgage. I don't think that counts as a short
sale.

I also know someone who bought a house as a short sale after the sellers had
failed to sell the house for nine months during which they had missed the
last four months' mortgage payments.

"WeathermanBill" <no[at]spam.com> wrote in message
news:=f6AR1U3AFyn5mbXK5th7fztUumo[at]4ax.com...

- quote -

I'm sure. Liability reduction = income.

WeathermanBill wrote:
- quote -

Normally that's true, forgiven debt is generally considered income under
federal tax law (unless it's forgiven in bankruptcy, or some other
special cases). But this was part of that mortgage relief bill at the
end of 2007. For the next 3 years, debt forgiven as part of a short sale
or refinancing workout won't be considered income.

-Tad

On Sat, 5 Jan 2008 20:42:52 -0600, TB <borekfm[at]pacbell.net> wrote:
snip

- quote -

1099'd to the original owner

Weathermanbill

"Gil Faver" <rowdy'sboss[at]xxyz.com> wrote in message
news:toSfj.381047$kj1.66358[at]bgtnsc04-news.ops.worldnet.att.net...
- quote -

well, reading the additional posts, I have now learned a bit more . . .

"TB" <borekfm[at]pacbell.net> wrote in message
news:XdXfj.33890$lD6.17198[at]newssvr27.news.prodigy.net...
- quote -

That makes sense. The lender would rather get something and minimize
their losses, than foreclose, own a property they don't want, and lose
more, anyway. Obviously it requires some prearrangement and, I assume,
active participation by the bank.

Thanks.

JQ wrote:
- quote -

JoeT - it's unusual in CA to use an attorney. Chris - key element of a
short sale is that the lender forgives all or part of the shortfall. Owe
$330k, sell for $300k, that's the end of it. I have no sense how common
these really are, they require that the lender go along with it.

JQ - you probably know whether this specific IE house has negatives that
drive the price down, even things that might have come to light only
recently (traffic, wildfire risk, mold, gang activity in the school,
etc). But it would not surprise me if the IE ends up with many 4BR/2BA
homes in the $300k range, just based on income ranges in the area, once
the housing-bubble dust settles. Incomes set a limit on home prices, in
an area where people actually buy homes to live in instead of as lottery
tickets or vacation residences. Eventually, anyway.

Another comparison to do is rental cost vs. ownership cost. I just did a
quick craigslist and there's a big range for 4BR + pool, under $2k to
over $5k, so that really depends on the specific area.

It is possible a bargain short-sale will come up, I just wouldn't use
recent list prices or even 03-06 sale prices to gauge what a bargain is.
So maybe it's just the market adjusting. I don't know of any buyer
concerns specific to a short sale. I guess they could set a low list
price with the hope of generating interest and an overbid, but that's
the same with any stale-fish listing.

-Tad

In article
<uoSfj.381049$kj1.360395[at]bgtnsc04-news.ops.worldnet.att.net> ,
"Gil Faver" <rowdy'sboss[at]xxyz.com> wrote:

- quote -

Well, if the owners have a $388,000 1st mortgage, and a $97,000
second mortgage, what option do they have other than to list at
$485K? If they had any money, they would have put down a down
payment. As it is, they have these big payments, they are dead
broke, and now they cannot make the payments anymore. Something
has to give.

-john-

--
================================================== ====================
John A. Weeks III * * * * * 612-720-2854 * * * * * *john[at]johnweeks.com
Newave Communications * * * * * * * * * * * * http://www.johnweeks.com
================================================== ====================

"JQ" <red_bowfire[at]removesbcglobal.net> wrote in message
news:5bCfj.3273$se5.536[at]nlpi069.nbdc.sbc.com...
- quote -

did you stop to think that maybe the $485k figure is ridiculous in the first
place?

"Chris Cowles" <NoSpam[at]ForMe.Net> wrote in message
news:OKRfj.34453$k27.32691[at]bignews2.bellsouth.net...
- quote -

yes. Delete the term "short sale" and substitute "seller highly motivated
for a prompt sale".

I was intrigued by the subject line, for the same reason.

Chris Cowles wrote:

- quote -

It's when the sale price is less than the the current mortgage, same as
'upside down'. It's not the same short as selling a stock before you own
it. Just happens to be the sale word.
JOE

"JQ" <red_bowfire[at]removesbcglobal.net> wrote in message
news:5bCfj.3273$se5.536[at]nlpi069.nbdc.sbc.com...
- quote -

Can someone please explain how the term "Short Sale" applies to real
estate?
--
Chris Cowles
Gainesville, FL

JQ wrote:
- quote -

There's the standard things to worry about, many of which a home
inspector should be able to find. Condition of roof, insect damage, dry
rot, etc.

In the case of a short sale, as long as the bank or holder of the
current mortgage is willing to release the liens for an amount less than
the full amount due, you should be ok. Really, that's what your lawyer
would do for you at (well, before) closing, he would ensure you have a
free and clear title only subject to your own mortgage, and whatever
easements (such as utility) that cross your property.

If I am the bank, I'd rather get $300K in cash against the note I hold
for $350K, than to have a property just sit there and run the risk of
vandalism, fire, etc.

There will come a time when the bottom has been reached, and it again
makes more sense to buy than rent, we just may not be there yet.
JOE
www.blog.joetaxpayer.com

I live in the Inland Empire area of southern CA, which is notorious
for being a typical example of the excess and bust that the recent
housing mess has wrought.
I understand the basics of a Short Sale, and trust me there are plenty
of homes out here that will probably end up in that situation in the
near future, but this one sounded too good to be true.
A local canyon home, 2 car garage, view of the valley, pool, 4 bed, 2
full bath advertised for 485k dollars. The price was crossed out and
changed to 300k, and the following: "...this house is subject to Short
Sale so bring your imagination and patience."
Considering the very simple homes in my neighborhood were selling
(well they aren't selling, more like sitting) for nearly 300k, I just
had to ask what the catch is here. I didn't think that the price would
be dropped that low. Yes the house needs some work, nothing major (new
carpet in areas, new cabinets, some paint).
While we are really not serious about buying this home, we are trying
to learn about how this all works in regards to short sale homes being
sold at such a discount and what sort of dangers a buyer might encounter
in such a case. Thanks for any info.