FAQ

What is a Short Sale?

A real estate short sale is a process in which the lender allows a homeowner to sell a property for less than the mortgage balance. The proceeds of the sale go to the lender.

For example, Mr. Smith currently owes $300K on a property, but due to current market conditions, the property is now worth $200K.  Mr. Smith might be able to short sell the property (sell the property for market value). All of the money from the sale would go to the bank, title, escrow, real estate brokers, etc. and John would walk away without a foreclosure.

Lenders only agree to a short sale if it is requested, submitted and properly negotiated.

Is a short sale right for me?

The Following are reasons why many decide to short sell their properties:

• If you owe more than your property is worth, and it does not make financial sense to keep the house.
• If you are struggling to make your mortgage payments.
• If your interest rate, monthly payments, or mortgage balance has been increasing.
• Relocating to a new area where paying for the current property and a new living situation is not feasible.

How much is this going to cost me?

Typically, NOTHING. The lender pays the Realtor commissions and all of the traditional seller fees and costs. No professional (ie. Realtor) will earn anything unless the short sale is completely successfully or another arrangement between the seller and realtor has been made.

What is the difference between short selling and foreclosing?

• A foreclosure will have a devastating impact on your credit score. Not only will this significantly drop the score, but will prevent the person from obtaining any type of financing for 7-10 years. Even after this period, the mortgage loan application will always state that the borrower had a foreclosure in the past, and will seriously affect underwriting decisions.
• A short sale will affect the credit, but not nearly as much as a foreclosure. The credit will be negatively affected for approximately 24 months; the seller should be able to purchase another home after this time period.
• A short sale can be handled discreetly, even without alerting your neighbors. In contrast, a foreclosure involves a public announcement.
• With a foreclosure, a lender can assign a judgment against the homeowner and garnish remaining assets such as bank accounts, income, etc. With a short sale, we pressure the lender to let you walk away free and clear without any deficiency judgment actions taken.
• Effects of Foreclosure Compared with a Short Sale

Are there any tax consequences?

In 2007, The Debt Relief Forgiveness Act and Debt Cancellation was passed. This allows homeowners to short sell their homes up to 1 million dollars with no tax consequences. Be sure to consult your tax professional for more information. You can also visit the IRS website at www.irs.gov.

Will I have to move out immediately if the lender agrees to the short sale?

No.  The bank actually prefers that you occupy the house during a short sale for maintenance and to prevent damage due to drifters, vagrants, and normal wear and tear.

Will I have to move out immediately if the lender agrees to the short sale?

No.  Even if someone makes an offer on the house immediately, it can still take 3 to 4 months for the short sale to be approved at the bank.

What types of real estate can I short sale?

It can be your primary residence, a second home or an investment property. In short, every type of real estate can qualify for a short sale.

Can any Realtor handle a short sale effectively?

Unfortunately, a lot of real estate agents and brokers claim to know how to complete short sales. However, short sales involve negotiating back and forth with the lender, and being able to meet your specific lender’s short sale guidelines to ensure you will be approved.

Choose an experienced real estate professional that understands the process and will guide you through it for the best possible chance of success.

Can I short sale if my payments are current?

Yes.

Can I short sale if I missed or am behind on my payments?

Yes.  You can even short sell a property if you are in default.

Can I short sale if I already received a foreclosure notice?

Yes, the lender has just informed you that they are planning to take action because of delinquency. We must contact the lender immediately to delay any further action and negotiate a short sale.

Can I short sale if I have already received a modification from my lender?

Yes.

Can I short sale if I have been denied for a modification?

Yes.

Can I short sale if I am in the process for a modification?

Yes.

Why would a lender agree to short sale and take a loss?

The foreclosure process is very costly (about $60,000) and after attorney, court and administrative fees, the lender will likely own a property that has depreciated even further. With a short sale they avoid paying costs associated with a foreclosure, sell in a stronger market, and write off the difference between loan amount and the sales price.

When it becomes apparent to the lender that the homeowner will no longer be making mortgage payments, the loan becomes a “non-performing asset,” also known as a “toxic asset.” This means the bank will suffer a loss on this property every month. The bank would simply rather liquidate the property and take a loss now than sustain a monthly loss over a long period of time.