Short Sale: The Basics

A short sale is when a home is sold for less than the amount owed on the mortgage for the home. This occurs when the bank agrees to take less than the full amount due on the mortgage.

A seller does not have to be behind on a home loan to seek a short sale. If sellers wish to pursue a short sale, they must owe more than what the home is worth, demonstrate the house cannot be sold for the amount owed, and suffer from a legitimate financial hardship that makes the mortgage unaffordable.

The next step in the short sale process is to assemble a short sale package. This package will include such things as a financial statement showing monthly expenses, income documentation, bank statements, tax returns, a listing agreement, purchase agreement, an estimated HUD statement and a financial hardship letter.

If the home is sold as part of a short sale, there will be a difference between the amount owed and what the bank collects. This is called the shortage or the deficiency. Sometimes this deficiency may be negotiable. Some banks will seek a promissory note for the deficiency, meaning that the seller may be responsible to pay the difference between what the home sold for and what is owed to the lender. Some lenders might choose to file a collection or a judgment for the amount owed. The seller should be certain that any amount of debt, or release from debt, is received in writing. If the deficiency is forgiven, the lender can write off the shortage with the IRS, which means the seller may be responsible for paying taxes on the amount of the deficiency. However, the Mortgage Debt Relief Act of 2007 generally allows taxpayers the potential for relief from tax on mortgage debt forgiveness.

A short sale will affect the seller’s credit score. To minimize the effect on a credit score, sellers should avoid making late payments on their mortgage and work with the bank to report the sale in the best possible manner.

We are not a law firm, nor an accounting firm, nor a credit repair organization. For advice regarding potential tax liability or credit scores, please consult a tax attorney or an accountant.

Dallas-Fort Worth-Arlington, TX
Overall rank: 5

The sprawling, vibrant, and diverse metro has a major international airport, professional sports teams, and large corporations. It is home to ExxonMobil, J.C. Penney, and TXU Energy. Employment in the Dallas metro peaked in the second quarter of last year. Gross metropolitan product in the second quarter was down just 1.7% from the peak in the third quarter of 2008. Home prices grew 3% in the second quarter compared with the same period a year earlier. And the unemployment rate in June was 8.2%, up 3.1 points from a year earlier. (Please see below for the various criteria used by the Brookings Institution to determine the overall ranking.)

Job growth (since peak) rank: 13
Gross Metro Product (since peak) rank: 11
Unemployment change (year over year) rank: 32
Home price change (year over year) rank: 3

Rates on 30-year home loans dropped below 5 percent for the first time in four months, but still remained above this year’s record low, Freddie Mac said Thursday.

The average rate on a 30-year fixed mortgage was 4.94 percent, down from 5.04 percent last week, Freddie Mac said. The last time the 30-year home loan averaged less than 5 percent was the week ending May 28, when it was 4.91 percent.

Rates hit a record low of 4.78 percent hit in the spring, and remain appealing for people interested in buying a home or refinancing.

On Thursday, the National Association of Realtors said the number of signed sales contracts rose for the seventh straight month in August, as homebuyers rushed to take advantage of a tax credit for first-time owners that expires in November.

“Low mortgage rates are helping to stabilize home sales,” said Frank Nothaft, Freddie Mac’s chief economist.

But borrowers may want to consider the Federal Reserve’s announcement last week that it is slowing down a program intended to lower mortgage rates and boost the housing market. Analysts say mortgage rates should remain low for now but could eventually move higher, and homeowners who want to refinance mortgages shouldn’t delay.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed mortgage fell to 4.36 percent from 4.46 percent last week, according to Freddie Mac. This week’s rate on 15-year mortgages was the lowest since Freddie Mac started tracking it in 1991.

Rates on five-year, adjustable-rate mortgages averaged 4.42 percent, down from 4.51 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.49 percent from 4.52 percent last week.

The rates do not include add-on fees known as points. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 point for 30-year mortgages, and 0.6 point for 15-year and five-year loans. The fee averaged 0.5 point for one-year mortgages.

Random acts of kindness remind us of the good in people that often times are overshadowed by life’s disappointments and setbacks.  Act of kindness such as opening a door for a stranger, sending a “get well” card to a good friend or allowing a car to merge into your lane are small but important gestures that build relationships and make our society stronger.

Acts of kindness can happen just about anywhere at anytime.  They happen when someone chooses to “leave themselves” and gives “of themselves” to someone else. 

Take for example Steamin Bean coffee shop located in Blue Springs, Missouri.  On July 6, 2009, a drive-through customer ordered a cup of coffee.  As she was paying for her coffee, she offered to pay for the next customer’s coffee as well.  In a few minutes, another customer came to the store and ordered a cup of coffee.  When told that the cup of coffee would be free – paid by another customer – he said he would do the same.  The tradition has continued to this day.  As of the date of this story, the Steamin Bean has served over 6,232 “pay it forward” cups of coffee 

Owner Garin Bledsoe says no one, it seems, wants to break the chain of good deeds.

“It’s hard times, but people are wanting to be part of something, knowing their five cents, their dollar goes to a greater good,” said Bledsoe. “They may not be able to change the economy, but they can change one person a day by doing a simple little gesture.”^[i]

Just imagine the impact of those 6,232 customers — an unbroken chain of kindness.  The cup of coffee provided a jumped start their physical bodies but emboldened their hearts in ways we can only imagine.  In fact, the “pay it forward” policy has been adopted by other businesses in Blue Springs.

What act of kindness can you or I start today?

Texas cities continue to lead the nation in homebuilding, even in the face of huge construction cutbacks.

Houston and Dallas-Fort Worth are the top markets in the country for building permits for single-family homes, based on numbers for the 12-month period ending in May.

And Texas had more homebuilding permits than California and Florida combined, according to data provided by California-based John Burns Real Estate Consulting.

Austin and San Antonio also rank among the country’s 10 busiest homebuilding markets.

“Texas didn’t see the downturn in the housing market the other states did,” said Lesley Deutch, a vice president at John Burns.

“Florida and California have really pulled off their permit totals, but Texas is still high up there.”

During the 12 months ending in May, almost 64,000 single-family homebuilding permits were recorded in Texas.

Houston had almost 22,000 permits, and more than 15,000 were recorded in the Dallas-Fort Worth area.

“It’s not surprising that we lead the country – both because every place is really hurting and we’ve held up relatively well,” said Dr. James Gaines, an economist with the Real Estate Center at Texas A&M University.

“We do have to be careful that we don’t build just for the heck of it.

“Most of the builders I’ve talked to say they are doing mostly contract work with just a few speculative homes here and there and only by those with capital resources to be able to finance it.”

Gaines is forecasting a 25 percent drop in homebuilding permits in Texas this year, “the lowest level we’ve had since 1992.”

“Builders have to build somewhere, and Texas is about the only game in the country,” he said.

“We still have a growing population – although not as much – and our home prices and markets have held up pretty well.”

At midyear, home starts in the Dallas-Fort Worth area were down about 70 percent from mid-2006 levels.

“The industry understands that Texas has performed much better than the rest of the country throughout the downturn,” said Ted Wilson, a housing analyst with Dallas-based Residential Strategies Inc.

“But to say that there hasn’t been pain here is a misstatement.

“Yes, the market has been better here, but you aren’t going to find many builders crowing about local market demand.”

Addison Kaboom Town-
Friday, July 3 5:00p to Saturday, July 4 12:00a
at Addison Circle Park, Addison, TX

Arlington,  Saturday  July 4th

Bedford, Saturday July 4th

Cleburne, Saturday July 4th

Dallas Fair Park, Saturday July 4th

Denton Fourth Jubilee, Saturday July 4th

Farmer’s Branch Celebration, Friday July 3rd

Frisco Freedom Fest-
Saturday, July 4th at 4:00 p.m.
Address is 6101 Frisco Square Blvd. (Main St. and N. Dallas Tollway)

Flower Mound, Saturday July 4th

Fort Worth, Saturday July 4th

Lewisville Red White Festival, Saturday July 4th

McKinney Red White & Boom-
Soccer Complex at Craig Ranch
Fireworks start at 9:30 p.m.

Plano All American 4th-
Oak Point Park
2601 Spring Creek Pkwy.
9:30 p.m.
Tune into 97.5 KLAK for simulcast

Richardson’s Family 4th,
Breckenridge Park
Fireworks start at 9:30 p.m.
On-site parking is very limited, so beginning at 6 p.m. on July 4th the City of Richardson will provide free round-trip DART shuttle service from the Rockwell-Collins International Campus located at the intersection of Renner and Shiloh roads.

Rockwall July 4th Celebration, Saturday July 4th

Spirit of Coppell, July 3-4

Southlake Stars & Stripes,  Friday July 3rd

Trinity River Fiesta, July 4th

Trophy Club Celebration, Saturday July 4th