New York Real Estate Lawyer Blog
To follow up on other stories in this blog, Short Sales gets very complicated and uncertain if there is more than one lender involved. Be sure that you are negotiating with the primary lender because junior lenders often absorb most of the loss, but you will need their approval too. Beware, sometimes the actual mortgage was sold to another entity, and you may also need approval from that company. To alleviate those problems, do a title search to verify the lien position of the lender you plan to contact.
One way to encourage a seller to participate with you is to advise them that the Mortgage Forgiveness Debt Relief Act of 2007 gives short sellers a tax break by changing the way the forgiven amount was viewed for tax purposes. The new law removed income tax liability for the “income” realized by not having to repay the entire loan– sellers get a tax break.
You must keep pestering the lender because time is of the essence. Shorte sales fall apart because the lender moves too slowly and fails to complete the deal before the property goes to auction.
Buyer can sometimes sweeten the deal for sellers by negotiating how the sale is reported to minimize the damage to the seller’s credit rating. While the lender has no obligation to agree to this in writing, it will give the seller a head start in rebuilding their financial lives. If the loan shows up on a credit report as “paid,” but “settled for less than originally owed,” the seller is much better off than if it is reported as “foreclosure.”
Bottom line– until this market bottoms out, we need to work hard to get that short sale completed by competent real estate attorneys, especially in Dutchess, Putnam, Rockland, Ulster and Columbia Counties, New York.