Hawaii Short Sales
What is the difference between a short sale and a foreclosure? With a short sale the seller only loses about 100 points off his credit score. With a foreclosure about 250 points are deducted from the seller's credit score.
With a short sale the difference owed in the mortgage balance versus what it sells for is taxable income to the seller. For example if you owe $250,000 on your mortgage and it sells for $150,000, the bank will give you a 1099 form from the IRS as income received and you pay the tax on the $100,000. With a foreclosure the seller has a deficency judgment for the difference between the mortgage balance and what the home sells for. In other words, the seller must pay the difference between the mortgage balance and the selling price, rather than just the tax on the on the debt forgiven.
Another advantage of a short sale versus a foreclosure is that within 18-24 months the short-seller has a better chance of getting a mortgage at a decent rate.
Short sales usually take about 30-60 days for the bank to approve the offer and then 30 days to close the property. There are items the bank is going to want from the seller.
Some items a bank may request from a short seller:
- Hardship Letter.
- Your last two years' tax returns.
- Last two months of pay check stubs.
In addition, the bank may ask your realtor for "comps" - competitive sale prices for similar homes, and an estimated HUD statement to find out how much of the loan balance will be recovered from the short sale.
Note: Some lenders will not grant a short sale unless the owner has defaulted on their loan payments. If you've made all your mortgage payments, the lender may say no! Talk to the lender about it.


