Frequently Asked Questions from Homeowners
What is a Short Sale?
Simply put, a short sale is used to describe the sale of a home in which the homeowner owes the bank more than the home is worth. The bank agrees to allow the home to be sold for less than what is owed (AKA “Short Sale”).
Simply put, a short sale is used to describe the sale of a home in which the homeowner owes the bank more than the home is worth. The bank agrees to allow the home to be sold for less than what is owed (AKA “Short Sale”).
Would I qualify for a Short Sale?
There are 2 main qualifications for a good Short Sale candidate…
There are 2 main qualifications for a good Short Sale candidate…
(1) A good Short Sale candidate is a homeowner who is behind on their mortgage payment and is unable to keep up with all of their monthly obligations. Some of the reasons for falling behind on their mortgage payment may include sudden change in monthly household income, loss of job, divorce, and more.
(2) A good Short Sale candidate also has no equity in their home. They are not able to sell their home and pay off all of the outstanding loans that are secured against their property.
How do I select the right team to successfully manage my Short Sale?
Before hiring just any 'Agent' to assist you in a Short Sale, make sure they are qualified and understand all the work that is required to see you through to the end. A properly trained Short Sale Agent knows what is required for a Short Sale transaction and therefore has a very high success rate. Most Realtors®, Investors and Real Estate Agents do not understand how to qualify you and your lender for a Short Sale Transaction. This is one of the reasons they often have such low success rates when it comes to closing a Short Sale. Investors have around a 10% success rate. Most other so called 'Real Estate Experts' don't do much better.
Be smart and make sure that you ask many questions before trusting your future, your credit and your financial situation with a self-proclaimed 'Expert' that may have just learned about Short Sales from a Title or Escrow Company, a Real Estate Seminar, or their Broker.
Before hiring just any 'Agent' to assist you in a Short Sale, make sure they are qualified and understand all the work that is required to see you through to the end. A properly trained Short Sale Agent knows what is required for a Short Sale transaction and therefore has a very high success rate. Most Realtors®, Investors and Real Estate Agents do not understand how to qualify you and your lender for a Short Sale Transaction. This is one of the reasons they often have such low success rates when it comes to closing a Short Sale. Investors have around a 10% success rate. Most other so called 'Real Estate Experts' don't do much better.
Be smart and make sure that you ask many questions before trusting your future, your credit and your financial situation with a self-proclaimed 'Expert' that may have just learned about Short Sales from a Title or Escrow Company, a Real Estate Seminar, or their Broker.
How long does it take to do a Short Sale?
There are several stages that are involved with the Short Sale process...
There are several stages that are involved with the Short Sale process...
(1) The first stage requires working with you as the homeowner to get all of the required documentation that your bank will require us to send them. This stage shouldn’t take longer than a couple of days.
(2) The second stage involves us preparing the listing paperwork and scheduling an appointment with you to see your home and prepare your home to be listed for sale. This stage only takes a few days as well.
(3) The third stage entails us aggressively marketing your home for sale and producing a willing, ready, and able buyer. This stage can take as little as a few days or as long as a few months. On average we receive offers on our listings within 3-6 weeks.
(4) The fourth stage is the actual presentation of the offer to your bank. This is where our expertise and experience in working through the short sale process benefits you.. The actual approval process can take as little as 2 weeks or as much as 3 months.
On average most Short Sales take between 30-60 days from the date the offer is presented to the lender to the date of the Short Sale approval. In most cases, 60-90 phone calls and faxes back and forth between the lender and our team are required. The process is usually not described as “fast” in most cases, but with the right team working on your behalf, you can be at rest knowing that everything is being handled diligently and with much care.
(5) The fifth and last stage to the Short Sale process is the period of time between Short Sale approval from the bank and the buyer closing on the home. We prepare all of the buyers that we work with to be ready to close in as quickly as 3 weeks from the time of Short Sale approval. Often buyer’s will even close in as little as 10-14 days.
What if I don’t have money to pay the Realtor commissions?
In a Short Sale transaction the Realtor commissions and any of the closing costs are negotiated with the bank.
In a Short Sale transaction the Realtor commissions and any of the closing costs are negotiated with the bank.
Are there any tax ramifications to a Short Sale?
Yes, These are complex, You should check with your CPA. However the Mortgage Forgiveness Debt Relief act of 2007, did eliminate liability in some cases. Again see your CPA
One more thing you should know is that in approximately 99% of the cases, the amount of the loss at Foreclosure is greater than that of a Short Sale. If you are going to receive a 1099 in either case, it is in your best interest to do a short sale instead of allowing your property to be sold for less at Foreclosure or as an REO (Real Estate Owned or Bank Owned Property). Now that you know this, don't allow rumors and incorrect information to influence an important decision in your life. Losing your home to Foreclosure is always the last resort and you should seriously look at all of your options before letting your home go to Foreclosure.
Are there any credit consequences to a Short Sale?
This question is asked very frequently and has many different variables involved. The first thing to keep in mind is that the moment you go 30+ days behind on your mortgage payment, your bank has the right to report to all of the credit bureau’s that you are 30 days behind on your payments. When a late payment is reported to the three major credit bureaus, it does have a direct affect on your credit. After going through a Short Sale or a Foreclosure, most people have multiple 30, 60, and 90+ day late payments reporting on their credit report.
This question is asked very frequently and has many different variables involved. The first thing to keep in mind is that the moment you go 30+ days behind on your mortgage payment, your bank has the right to report to all of the credit bureau’s that you are 30 days behind on your payments. When a late payment is reported to the three major credit bureaus, it does have a direct affect on your credit. After going through a Short Sale or a Foreclosure, most people have multiple 30, 60, and 90+ day late payments reporting on their credit report.
When the actual Short Sale is completed, most banks will report to your credit report that your account was “paid in full for less than the full amount.” Your credit report may also be marked as “settled.” It is important to keep in mind that each lender has a different way of reporting that a Short Sale was done, but this is the most common language that is seen. If your home were to go to Foreclosure you would most often see the bank report “Foreclosure” on your credit report.
It is difficult to measure how much of a credit scoring affect a Short Sale has vs. a Foreclosure. Credit experts will agree that neither a Short Sale nor a Foreclosure is favorable to your credit or credit score, however, the impact of a Foreclosure is much worse. We strongly advise you to work with a Credit and Credit Scoring Expert for more specifics on this topic, and ways in which to improve your credit after the Short Sale is complete. Also, if the owner has judgments that can be paid as part of a short sale, the lenders may allow those to be paid, at least in part. A foreclosure will only release the property from judgments, not the borrower personally. So, a short sale where the judgment is paid and released is a better outcome.
Why exactly would a bank agree to a Short Sale?
It is much more cost effective for a bank to do a Short Sale rather than Foreclose on a home. Banks are not interested in owning real estate. Banks make their money from receiving monthly mortgage payments. While banks will take a loss doing a Short Sale, they can often minimize their loss by as much as 10-20% over a Foreclosure.
It is much more cost effective for a bank to do a Short Sale rather than Foreclose on a home. Banks are not interested in owning real estate. Banks make their money from receiving monthly mortgage payments. While banks will take a loss doing a Short Sale, they can often minimize their loss by as much as 10-20% over a Foreclosure.
Can the bank sue me or place a judgment against me for the difference between what I owe and what the home sells for?
This is a good question that is best answered by a qualified Real Estate Attorney. It is important to understand that any loan secured to your home, is also personally “backed” by you. What this means is that even though your bank may agree to do a Short Sale or Foreclose on your home, they may have the right collect any short-fall, even after the Short Sale or Foreclosure is complete. It is important to know whether the bank’s short sale approval includes a “note back” or an agreement to pay the deficiency. In other words, the bank may agree to release your property from the debt, but not you. Generally speaking, if the bank forecloses on your home, they will waive the right to pursue you for a deficiency judgment, thereby allowing them to speed up the foreclosure process. However, other secured creditors, like judgment holders or construction lien holders may still have the right to sue you personally – only their lien on the property is foreclosed. You should consult a qualified Real Estate Attorney to determine your rights and obligations.
This is a good question that is best answered by a qualified Real Estate Attorney. It is important to understand that any loan secured to your home, is also personally “backed” by you. What this means is that even though your bank may agree to do a Short Sale or Foreclose on your home, they may have the right collect any short-fall, even after the Short Sale or Foreclosure is complete. It is important to know whether the bank’s short sale approval includes a “note back” or an agreement to pay the deficiency. In other words, the bank may agree to release your property from the debt, but not you. Generally speaking, if the bank forecloses on your home, they will waive the right to pursue you for a deficiency judgment, thereby allowing them to speed up the foreclosure process. However, other secured creditors, like judgment holders or construction lien holders may still have the right to sue you personally – only their lien on the property is foreclosed. You should consult a qualified Real Estate Attorney to determine your rights and obligations.
I heard that “Short Sales rarely close and banks don’t approve very many of them”. Is this true?
It its true that banks are reluctant to approve short sales, especially those that are poorly presented, unrealistic and lack the right documentation. That is why it is so important that you hire an expert to help you through the process and assure that you submissions are timely and complete.
It its true that banks are reluctant to approve short sales, especially those that are poorly presented, unrealistic and lack the right documentation. That is why it is so important that you hire an expert to help you through the process and assure that you submissions are timely and complete.
I’m behind on my payments, how long until the bank forecloses on my home?
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While the bank has the right to send a notice of default after just 15 days, they rarely do. Banks may send a Notice of Default to home owners when they become anywhere from 30-90 days delinquent. The Notice of Default will demand that you cure the problem (pay what’s due) within 30 days or face a possible Foreclosure. The Bank can file a foreclosure action at anytime after the 30 day period expires. The Foreclosure action starts the legal process for the bank to sell the home at a sheriffs sale. Homeowners have a “redemption period” to pay everything that is due and keep their home, ending the foreclosure process. This redemption period is usually 6 months from the time of the Foreclosure Judgment (it can be much shorter or as long as a year). Since the Judgment is not usually entered for 3-6 weeks after the foreclosure is first filed, home owners often have 7-8 months to live in the house from the time the Foreclosure is filed until the sheriffs sale takes the property.
When should we begin working on the Short Sale together?
Ideally we would like to begin working on your Short Sale as soon as you recognize that you are unable to keep up with your payments and will be falling 30+ days behind. The important thing for you to know and keep in mind is that the sooner we begin working with you on the short sale process, the more you increase your chance of a successful closing. Don’t wait any longer, act today to get the process started!
Ideally we would like to begin working on your Short Sale as soon as you recognize that you are unable to keep up with your payments and will be falling 30+ days behind. The important thing for you to know and keep in mind is that the sooner we begin working with you on the short sale process, the more you increase your chance of a successful closing. Don’t wait any longer, act today to get the process started!
Adapted for Wisconsin by Peter Zarov of Homestead Title from original document by Derek Gilbert of Arizona who provided help for this information. see web site
