Short sale basics | Housing | Finance & Capital Markets | Khan Academy

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Finance and capital markets on Khan Academy: Most people buying a home need a mortgage to do so. This tutorial explains what a mortgage is and then actually does some math to figure out what your payments are (the last video is quite mathy so consider it optional).
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[@anthonydooley224]

A short sale affects your credit rating almost as bad as a foreclosure. It usually requires you to be behind on your payments. It also may take months to close a short sale. The IRS does consider forgiven debt as income, not "might." Another option, that you didn't cover, is to sell it for $120,000 and get a loan for $30,000 to cover the balance. I would rather owe the bank $30K than $150K and the payments would be more manageable. This also preserves your credit rating, if that is important to you.

[@merenguero172]

I guess it's true, anyone can be a professional on the socials. This video was posted 10 years ago to the year (it's Q12024 at the time of this comment). At the time, the Mortgage Forgiveness Debt Relief Act of 2007 was in full effect, and YES with the proper paperwork filed by a CPA, the amounts were forgiven. Also, for a person to be in a position to do a short sale, theres a HUGE possibility that they will not qualify for any type of loan. Usually by the time a person gets to the point where they have to give up THEIR HOME, their credit is long gone, and their house is the last thing standing. Context and having all the data is crucial before making the claims you made in your comment. Just a thought for the future for you and anyone looking to comment on social media outlets. Context and having all the data is key!. - Sincerely, a person who loves to stop foreclosures and seeing the banks attorneys furious LoL

[@LasVegasRealEstateNOW]

As usual, Khan Academy does a better job explaining something than I ever could, even though I work in real estate.

[@aeromedical6750]

@LV Real Estate Radio - this is perhaps the BEST explanation of what a short sale is. It’s concise, and not loaded with a lot of “fluffy” confusing language.

[@dipansarma4596]

What does it mean that you work in real estate? Actually I have no idea what it is

[@astayonix]

I did a short sale back in 2010, and I wouldn't wish that on anyone. It is literally one of the 3 worst things that's ever happened to me. It was a long, drawn out fight, and thankfully, I was able to get most of the balance forgiven and my lawyer and I set up terms such that the most positive possible outcome was reported to credit agencies. Your loan will get reported to credit agencies regardless. The best you can get is "paid as agreed" so make that a condition of the short sale.

[@mariaalejandralacruzpaez7735]

Many thanks, I been tryin to find out about "need sell house fast" for a while now, and I think this has helped. Have you ever come across - Penictoria Subjective Prevalence - (Have a quick look on google cant remember the place now ) ? It is an awesome exclusive guide for discovering how to sell your house fast without the hard work. Ive heard some great things about it and my brother in law got excellent success with it.

[@trinahorton8839]

20 videos and landed where I should have started in the first place. I constantly underestimate all that Khan academy teaches. thank you!

[@markgriz]

It's less hassle for the bank than a foreclosure. If they foreclose, they still have to go through the process of selling the house, at pretty much the same loss, or maybe even a bigger loss if they get rid of it at auction..

[@kingmarothementor4773]

Thank you for getting straight to the point

[@macrapidito1]

I just would like to know what software did you use to do the writing in the video ? very well explained too thanks for the share and the answer

[@astayonix]

The rules of short sales are governed by the state you live in. If you live in a single-remedy state (like Washington State), the bank can EITHER take the house (foreclosure) OR they can sue you for the balance of the loan. However, there are also dual-remedy states (like Virginia) where the bank can BOTH take the house AND sue you for the balance. Be sure to talk with a good lawyer in your state to see which rules apply and plot your best course of action if the short-sale effort fails.

[@gianni_4]

astayonix I am a realtor in Arkansas any thoughts on that ?

[@sandile84]

Good point, and I now understand.

[@JR-gh8lp]

Amazing explanation

[@tonyinspector3031]

awesome, thank you for the video.

[@aeromedical6750]

I’d be more inclined to purchase a foreclosure vs. a short sale home. As the buyer, you are at the mercy of the bank agreeing to the short sale. No way I’m falling in love with a house that the bank could hold out for on your offer. I’m curious if a potential buyer is allowed to know what the seller owes on the mortgage when making an offer.

[@8signs]

Very simple and understandable explanation

[@Oskitar_warready]

Great video!👍🏼

[@jwfcp]

dont think of it in terms of the traditional "I hired a walk in off the street" employer-employee dynamic. a group of friends go into business together, they collude and conspire to maximize their own profits at the expense of everyone who isnt part of their clique.

[@porkchop1343]

Thanks man

[@STIZO99]

It's kind of like picking the lesser of two evils for the bank, should they choose to....either forgive $30k or deal with a borrower that forecloses on a $150k loan.

[@zalida100]

In order for someone to owe a bank, the bank would have to lend the "borrower" some money first. Banks don't lend money. They use you to create currency. There is no consideration put up by a bank.

[@ceazamill1]

The "loophole" is the exact same loophole that's in our Federal Reserve

[@cruzdt]

For a friend of mine, I wish he knew about this sooner.

[@keithoberg9273]

checkm_8 it's not the greatest thing it is a score for the buyer but the owner is limited on what he can RECIEVE then gets taxed on the difference the company who bought the property for from what the owner owed. So 500k house owner owed 550k. Buyer gets bank to sell for 400k to cut losses now the original owner has to pay the tax on 150k difference it's not always great for seller

[@farhanjp]

Does IRS consider 120k income of the bank too??

[@sandile84]

My question is what's in it for the bank to forgive a $30 000 amount of money it is owed?

[@tylernorman25]

I would say because they are more happy to get the $120,000 for the house then the $0 the current owner is paying on the mortgage, also banks don't want to own houses they want to own money, so if they sell the house not only do they get a nice down payment they now have a new owner now that will start making payments.

[@karajones4638]

They have insurance theyve been paid already thats the trick

[@MrHammer2088]

@@karajones4638 exactly- that's what the PMI do- it's insurance on the mortgage in the event of default..

[@SylwekGrega]

I think the bank could maybe get their money faster I presume if they short sale your home and forgive the 30k. They still made i guess 170k from you, which doesn't seem like much compared to how much they could of made over time with the interest rate. Quite a bad scenario, I guess the best thing our of these two options of short sale and foreclosure is to not be in it.

[@BeKindPlox]

a instant 120K payment in one year instead of many years ;-)

[@SN-hv5zx]

What does it mean for potential house buyers if their house ad says "this is a short sell"?

[@keithoberg9273]

sky nguyen the homeowner owes more then the value if you see that jump on it no matter what the price is even after you sign until you close you can negotiate a better price with the bank depending on the bank some are really good some very tuff

[@keithoberg9273]

Contact me for any info it's my job

[@MrAtbillings]

Describe this "loophole" more? What benefit is there for an employer to give employees a non-taxable loan and forgive it instead of providing taxable payroll?

[@echelecopao]

I would guess foreclosing would also cost them money. And a foreclosed (usually abandoned) house will likely lose its value even further.

[@niquil8985]

Im getting serious PTSD from my calculus days

[@zdrkp]

Nothing, that's why it's forgiveness.

[@benl308]

just do a DIL everyone. forget about short sales.

[@AntiMatternot]

Is this really a short sale? You are selling the property, you own the property.

[@keithoberg9273]

AntiMatternot it's a short sale because the buyer pays a discounted price some banks are a LOT easier to work with but it then is not the best for the seller

[@thegods2622]

I gotten my house back from my cheating ex wife after she won it in a divorce back in 08 best revenge ever 🤣. In the best part it's been paid off and she still renting since then, it's 2022

[@Juanitaxoxobeauty1990]

TAKING LONG

[@marcoscampos9565]

JLUVSBEAUTY its a 7 minute video chill out lol

[@FajorMuckup]

I thought this was good

[@bhsjenner]

If you got no job and going broke... get a loan to buy a $400k house, sell it for $350k, put the money in another bank, rent an apartment and loan, while u try to get better job :D -you should have a 1 or 2 years window to find a job or win the lottery :D

[@fastkid49]

what money are talking about putting in another bank

[@migueltehuitzil1260]

Jenner Palacios that sound dumb

[@stevenbillington6421]

if you have no job and no money, who is going to sign off on a $400k loan for you?