An Overview of Short Sales in Illinois

 Posted on February 10, 2023 in Real Estate

Rising mortgage rates, property taxes, and other economic challenges mean that many homeowners are struggling to make monthly payments on their homes. This can put enormous pressure on a family and require them to make a decision about how to manage their spiraling mortgage debt fast. One option may be putting a house up for short sale. If you are interested in learning more about short sales, how they work, and how one might be helpful to you, read on and then contact an Illinois residential real estate attorney. 

What Is a Short Sale? 

A short sale is when a homeowner sells their house for less than they owe on their mortgage. The biggest benefit of a short sale is that the homeowner has a better chance of selling the home before it is repossessed in a foreclosure by the mortgage lender. If someone makes an offer on the home, the mortgage lender has to decide whether to accept the offer. 

If a home is sold in a short sale, all of the proceeds go to the mortgage lender, who then decides whether to forgive the remaining balance or to try to get the homeowner to pay it. Certain programs, such as the Home Affordable Foreclosure Alternatives (HAFA) program, may be available to help people get into a more affordable housing option while getting the remainder of the balance on the original mortgage forgiven and a small cash payment to assist in relocating to a new home. 

What Do I Need to Do to Get Ready for a Short Sale? 

Although a short sale is not a foreclosure, it is still a complex real estate transaction that takes careful preparation. Before putting your house up for sale, you should: Know who and how much you owe, including any liens on the home besides the mortgage. 

• Build a strong short sale team, including a real estate agent and an attorney. 
• Get documentation pertaining to your home and personal finances ready. 
• Consider the effects of a short sale on your credit score. 
• Find out whether you will need to pay the remaining balance on the mortgage. 

How Could a Short Sale Impact My Taxes? 

Your taxes could be affected if your mortgage lender decides to forgive the remainder of the mortgage balance. Any remaining balance will be reported as a debt cancellation on a 1099-C form, which is then treated as taxable income. Various factors can affect the tax implications of a short sale, so it is important to discuss the options with an accountant. 

How Can a Lawyer Help with a Short Sale? 

People who owe more money on a mortgage than their house is worth are often in a vulnerable position. A real estate attorney has the responsibility to advocate for a client’s best interests, including helping them negotiate with lenders, realtors, and anyone else involved in the transaction. An attorney can also help fight for the lender to cover certain fees, for cash back once the house is sold, and for a full release of any additional money owed to the lender. 

Contact a Friendly Cook County, IL Real Estate Lawyer

After many years of living and working in Illinois, Whitacre & Stefanczuk LTD knows your community. We strive to provide legal representation to people who need help in all matters related to residential real estate, and will make sure you have the information you need to make smart decisions that will benefit you and your family. If you are interested in learning more about short sales, contact our DuPage County residential real estate attorneys at 773-622-6100 and schedule a free consultation. We speak Polish. 

Sources: 

https://www.investopedia.com/terms/r/real-estate-short-sale.asp

https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=073500050K15-1401.1