Short sales of real estate in Louisville, KY, are made when the home is worth less than the debt owed. You are offering the bank less than what is owed so someone can purchase it. A relative or insider can buy your home, but often, you have to prove that what is being offered is the best price the mortgage company will obtain. The house will often sell at a Commissioner’s auction for 20 to 30% less than the assessed value for real estate in Louisville, Ky.
Louisville short sales can be obtained at lower prices than market value, offering potential buyers a cost-effective option. However, this option works best for a homeowner with just one lien on short sale homes, which is more than the home’s value.
Making a reasonable offer to the Lender
In order for you to make a reasonable offer, you just have to show that you are offering more than what would be obtained at the auction.
I don’t see any substantial advantage to the homeowner in attempting a short sale in Louisville, KY, unless you are attempting to keep the home in the family and a relative is purchasing the property. Selling a home in the real estate market through a real estate agent requires a lot of work you are doing for free for the mortgage company. Short sales require substantial proof that you are offering the lender more than they will get in foreclosure. Having that relative purchase the home at the commissioner’s auction is often cheaper and less troublesome.
Short sales force you to do all the work for your mortgage company. Your credit receives slightly less damage if you short sale than if you have a foreclosure. Short sales are an effective tool to keep the home by eventually repurchasing it from the purchaser. It is called a white knight purchaser.
A mortgage company will often refuse to accept the offer for other reasons, which will be discussed in the next section. You may submit a fair offer to the bank. But they will often refuse it or take months to accept it.
The Issues that Complicate or Improve Kentucky Short Sales
Servicers prefer to offer mortgage modifications that temporarily lower an interest rate. If the homeowner offers a short sale deal, you must provide proof that your short sale is the highest price obtainable. Past sales history and recent or new matching listings provide the details.
To sell the home, you must give the buyer a clear title. If there is a second mortgage, you must make two banks accept your offer. When two liens or mortgages exist, the issue is that there is no advantage to the first mortgage to share less than what the home brings at foreclosure with the second mortgage company. The second mortgage company often refuses to accept a short sale unless they receive substantially more than a foreclosure brings them; also, you can check for the market report. If no matching listings meet your criteria, consider modifying your search parameters or signing up for notifications when new listings that match your interests become available.
The problem is always in convincing the lenders to accept a better deal than what they get at auction. If the homeowner files bankruptcy and lists the property in bankruptcy as far less than the mortgage, then the mortgage company seems to more readily accept a short sale. Filing bankruptcy convinces the lender that the homeowner will no longer retain the short-sale home. Then, the lender must take the time and expense of foreclosure or the immediate and better offer of a short sale after looking at the market report. The problem for the lender is that the home continues to report as a bad debt until there is a resolution. It also costs the lender higher rates for the money it borrows to lend.
The Issues to Remember in Kentucky Short Sales
Remember, the bank’s primary concern is what brings them the most profit, whether from the short sale or a Commissioner’s auction.
- Mortgage companies will look at similar sales of properties nearby or other homes for sale currently. Louisville, KY MLS provides frequently updated listings and additional information to assist potential buyers in finding short-sale homes. You can receive email alerts.
- Servicers search other properties using a white picket real estate list to value short-sale property.
- Servicers will often resist the homeowner’s offer of a short sale.
- Based on the past sales history and other Louisville short sales, for real estate, your offer may be declined after working a long time to get it approved.
- Your goal should be to make the most profit you can by either short-selling the property, defending the foreclosure, or keeping the property.
Advantages and Disadvantages of Louisville Short Sales
A short sale can take up to a year for approval. It also often gets you out of the house sooner than staying in it by defending the foreclosure. Short-sale properties often leave you owing a substantial tax debt even if you have an agreement not to owe the deficiency. Email alerts can help potential buyers stay informed about new short-sale listings that match their search criteria. It can also leave you owing for a deficiency; for any flaw, you can further search criteria for getting approved real estate short sales.
The Internal Revenue Service rules and regulations for short-sale properties require the mortgage company to submit the 1099-c for any loss. To avoid a tax debt, you must know the criteria for 1099 liability. Regardless of your agreement with the mortgage company or what they tell you, you can’t get around the tax rules and regulations of the IRS. The primary reason for offering a short sale in Louisville, KY, is to have a slightly better credit file or to keep the home in the family. The advantage is very slight. Many people are sold on the idea that they will avoid the 1099 problem after short sales. However, short sales do not avoid the 1099 tax problem. Only catching up on the mortgage or bankruptcy guarantees keeps you from the tax liability of a foreclosure and a deficiency judgment. In some states, they will garnish wages, bank accounts and place judgment liens on property you acquire later.
Still, there are situations where Louisville short sales to a relative or insider allows you to stay in the property. Many of my clients let their homes go back in foreclosure if that is what is most profitable for them. Sometimes, keeping a home is a mistake. It may be cheaper to defend the foreclosure instead and live in it rent-free for 1 to 2 years until the auction date and file bankruptcy to avoid the tax problem and any possible deficiency.
Thinking About Short-Selling Your Property?
If have chosen to go for a short sale, I can help you with the details and procedure. Some people use the Louisville KY MLS system to receive email alerts from sellers. You must know who is there to help you in the matter and who is there to make a profit from you. Therefore, always go for a trusted attorney near you.
Resources for Bankruptcy
Louisville, Kentucky Bankruptcy Forms
Learn About Louisville Short Sales
Kentucky Foreclosure Law Process
Louisville Kentucky Foreclosures and Your Options
Discharge Private Student Loans in Bankruptcy
If you are considering foreclosure, don’t delay because timing is crucial. I am here to help you. So, contact my office immediately to start the conversation—Nick C. Thompson, Bankruptcy Lawyer:
