-Provide you data to help you come up with a fair offer price – helps ensure you don’t offer more than home will appraise for and that you don’t end up paying way more than the guy that bought the house next door two months ago.
-Provide you with the local purchase agreement contracts and any additional documents that need to be signed by law (banks don’t provide these things)
-Help you negotiate with the seller, using their experience to come up with solutions to conflicts that may arise
-Ensure the seller takes care of their legal obligations
-Advise you on important contingencies that need to be in your offer
-Walk you though the steps of what you need to do to get the deal done

Don’t assume you’d have to pay an agent’s commission. Unrepresented sellers are sometimes willing to pay the buyer’s agent’s fee. If not, you may either pay for your own representation this way or through an attorney, but it’s never advisable to do something with so many legal & financial ramifications without professional assistance.

If all the price negotiations, etc. are done, you may be able to negotiate with a buyer agent for a reduced fee, just to have the satisfaction of knowing that your interests are properly represented.

The main benefit to you is knowing that everything was done legally. Almost all Fabio’s end up in court, one of you screwed something up.

While there may be a mess up still, the agents broker takes the heat, not you.

I buy a lot of property. I think I know enough to manage on my own…but still I would not even entertain the idea of going it without my trusted broker.

So, unless you know alot about this sort of thing I would go ahead and get an agent. If you tell them that you have the property picked out and just need help with the contract thru closing maybe they’ll give you a rebate on their commissions since they have less work to do.

First, if you are not having problems making the payments each month then your lender will probably not allow you to do a short sale. Why would they if they believe that you can keep making the payments on the full loan amount? So, most banks won’t even consider a short sale until you have missed a few payments. These missed payments will show up on your credit report as “lates” and will have a negative effect on your credit score.

Second, the bank may or may not accept the loss which, in your case is around $60,000. While most lenders will not pursue a deficiency judgment they do have the ability to do so in some states. Usually if the mortgage was used to actually purchase the home they will not pursue a deficiency and cannot in CA but if it is a refinance then they can pursue a deficiency judgment by suing you in court. It’s not likely that this will be the case but you should be aware that there is the possibility. When conducting the short sale negotiate with the lender to make sure they are not going to pursue a deficiency.

Third, it is also possible that the IRS will want you to pay taxes on the $60,000 “debt relief”. The IRS sees it as income because it is money that was given to you and you had it at your disposal. There are ways to avoid this tax. There is an “Insolvency Exclusion” that occurs when your liabilities/debts are larger than your assets. If this is the case at the time of sale then it’s possible the IRS will exclude the shortfall ($60,000) from taxation. You definitely need to talk to an experienced accountant or tax attorney about this before the sale occurs as it could save you quite a bit of money and needs to be done correctly.

Lastly, your credit report will be affected negatively by a short sale. While each case is different and no specific numbers are known, the general consensus is that a short sale will cost you 100 points on your credit score and stay on your credit report for anywhere from 18 months to 4 years. However, it is still better than an outright foreclosure which can cost up to 280 points on your credit score and stay on your credit report for up to 10 years.

So, with a short sale it may be possible to purchase another home in a couple of years – depending upon the circumstances. You would have to work on improving your credit over that period of time and you would also be subject to poor loan terms when you do get a loan ie. a higher interest rate and larger down payment.

In the end a short sale is a better alternative than a foreclosure. If you don’t have to sell your home perhaps you should contact your lender to see if they will consider a forbearance or modification of your existing loan terms. If so, then you might be able to lower your payment or skip a few payments until your financially back on your feet.

Good Luck!

The bank does write off the loss, BUT the loss is turned over to YOU in the form of income. They issue a 1099 with the IRS for the amount of their loss, and you have to claim it as income on your state and federal taxes. It is income because they actually did give you the cash, you bought a house with it. You are going to need to come up with about 40% (depends on your taxs tax rates) of that money to pay income tax on it. If you don’t pay the taxes on it your credit gets worse, and you have your state and the IRS doing what they do, and they WILL get their money if they have to garish half your wages. Also, the fines for not paying are very high.

As it takes awhile to start garnishing you may loose your next house in the process, as most people do not budget to suddenly be short half of their income.

Make sure you understand the process and will be able to cope with the process before you go this route.