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702-239-8400 Randy Milmeister, Broker

 What the heck is a Short Sale?

A Short Sale happens when a lender accepts less than what is owed on the balance of the mortgage in a real estate sale.  When faced with unfortunate circumstances, not being able to continue making mortgage payments, which may result in foreclosure, the best option may be for a Seller to work out a short sale.  Sometimes, foreclosure is not avoidable.  However, a Short Sale works to SETTLE DEBT, not abandon or walk away from the responsibility of a home mortgage.  

“I don’t think anyone goes into what ought to be an incredible experience of buying a home, and signing for a mortgage with the intent or even consideration of not fulfilling that obligation.  Most of us work hard, so that we may enjoy life, pay our bills, and live a certain lifestyle.  It is a terrible feeling to even think about missing a payment, when many of us have lived our lives rarely even being late on any payment.  However, sometimes things just don’t work out the way we had planned.  If we could, most of us would pay the lender what is owed.” Randy Milmeister

A Short Sale is telling the bank “look, I apologize for not being able to make these mortgage payments, and unfortunately the home is worth much less than what is owed.  I will do my best to get the most money for this home, in order to settle the mortgage debt.”  It is not ideal, however it is making the best out of a tough situation.  Also, there is no reason to be angry with the bank, we are all responsible- buyers, lenders, real estate agents, politicians, bankers, loan officers.  Focusing on negative emotions, instead of solutions, is not going to help us to move on to better things.

Short Sales benefit Sellers, lenders, and the community.  Sellers are able to settle their debt.  In most of our short sales, our agents are able to negotiate a deficiency waiver.  A deficiency waiver releases the Seller from any further financial responsibility for the outstanding lien mortgage loan.  For example, if the balance of the mortgage is $200,000, and the net proceeds of a sale are $100,000, there would be a $100,000 deficiency.  Without the deficiency waiver, a lender may pursue the borrower for the deficient amount.  People are sued for this deficiency.  Another benefit for the Seller is that a Short Sale has much less of a negative consequence as foreclosure.  A credit report will reflect that the “loan was paid off for less than what was owed.”  If a Short Sale is the only negative item, a person’s credit score may increase because the debt is no longer reflected.

Lenders benefit because, in most cases, they will be able to recoup more money.  The community benefits from having a resident caring for the property until it is sold.  Many foreclosed homes sit vacant, becoming an eyesore, and contribute to a depressive state.  We want our neighborhoods to be full of life and vibrant.

We have two of the best Short Sale managers in the State of Nevada.  Feel free to call, so that we may help educate you or someone you know, or complete a Short Sale for you.  Randy Milmeister

Short Sales by Sue Saunders- Nevada Association of Realtors General Counsel

A short sale is a sales transaction in which the seller’s mortgage lender agrees to accept a payoff of less than the balance due on the loan.


If the borrower is faced with foreclosure, he/she may try to avoid foreclosure by the short sale. If the borrower is unable to pay the mortgage, he may negotiate with the lender to accept a discounted payoff on the loan. This is called a “short sale” or “short payoff.” A short sale occurs when the value of the property is less than the amount owed to the lender, and the lender agrees to write off the difference. It allows the borrower to avoid a foreclosure action, and may offer the lender an expedited and less costly resolution to the situation.


Why would a lender agree to a short sale? Lenders make their own business judgments when accepting or rejecting short sales. Lenders are in the business of making and servicing loans, not taking properties back through foreclosure and reselling them. They want to avoid spending time and money to foreclose, evict borrowers, and resell properties. They want to avoid paying property taxes, insurance, maintenance and repairs. They want to avoid risking theft and vandalism to the property.


A short sale may be the answer for assisting a borrower in a tight situation. A short sale allows the borrower to maintain a better overall credit record. It can help the lender in avoiding the expense of foreclosure. Sue Saunders, NVAR General Counsel 

Mortgage Forgiveness Debt Relief Act of 2007,,id=179414,00.html


The Mortgage Forgiveness Debt Relief Act and Debt Cancellation

If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable.


The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.


This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.


More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.


The following are the most commonly asked questions and answers about The Mortgage Forgiveness Debt Relief Act and debt cancellation:


What is Cancellation of Debt?


If you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes, depending on the circumstances. When you borrowed money you were not required to include the loan proceeds in income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.


Here’s a very simplified example. You borrow $10,000 and default on the loan after paying back $2,000. If the lender is unable to collect the remaining debt from you, there is a cancellation of debt of $8,000, which generally is taxable income to you.


Is Cancellation of Debt income always taxable?


Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:


Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.


Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.


Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.


Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.


Non-recourse loans: A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.