5) Undisclosed Consequences
There are legal and tax consequences to every short sale. And this last ‘reason’ can be combined with several of the others above. But, I have seen short sales fail because a Seller is unaware of the repercussions a short sale may have. For example, a Seller may be issued a 1099 to the IRS for the deficient amount after a short sale is completed potentially creating a unexpected tax liability. Other times, a lender may accepted a short payoff but not release the Seller and after close sue the seller in court for the deficiency. The Seller’s credit may also be negatively impacted if amends are not made to the satisfaction of their lender.
Not all of this can be done or should be done by a competent Real Estate agent. In fact, all of my Sellers are expected to seek advice and counsel from tax and legal professionals. Nonetheless, if a Seller is not properly informed of all that may happen, it can be quite a shock to them when they learn that they have to bring $10,000 to closing, or that they may be sued right after close of escrow.
If you are a buyer, short sales can be a great way to buy or the only way to sell your home if you owe more than your home is presently worth and you must sell. But like anything, there are ups, downs, whatever your choice make sure to surround yourself with experts with whom you are comfortable with and who will work diligently to represents YOUR interests not theirs, regardless if you are buying or selling.
Drew Ludlow is a Licensed Real Estate Broker in Charge/Owner of Cornerstone Property Group with more than 10 years of experience assisting buyers and sellers in Apex North Carolina