SHORT SALE OF REAL ESTATE IS A GOOD IDEA!

A short sale of real estate is when the owner owes more than the house is worth. The owner and the bank agree to sell the property using a real estate agent and a multiple listing service. The bank agrees to 'forgive' the part of the loan which is not paid off by the purchaser.

This can be a hassle, as banks are reluctant to 'forgive' loans. However, it is a win-win-win for the seller, the buyer, and the bank. Foreclosure is expensive for the bank. Buying a foreclosed home is risky for the buyer (who usually cannot inspect the property). Foreclosure hurts the owner's credit rating worse than a short sale.

Short sales use the free market system to set a new and reliable price for the home.

The seller's tax consequences for a short sale are exactly the same as for a foreclosure. Owners of rental houses should remember that they are taking a business loss, which may more than cover the 'income' from the loan forgiveness.

I also recommend that sellers put something in their sales agreement that limits the money they might have to spend on inspections and improvements. Owners should also consider selling the home 'as is' to prevent lawsuits over undisclosed defects. Owners should also disclose all known defects even if they sell 'as is'.

And, of course, I ALWAYS say that NO ONE should agree to binding arbitration. See my website, www.LawandLaws.com, for a discussion of binding arbitration.