Short Sale FAQ

 

1. What is a Short Sale?

A short sale refers to the process by which a homeowner sells his/her home for less than the amount owed in the mortgage. It can be accomplished by submitting required documentations to request the lender to accept the discounted payment.

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2. Is a short sale right for me?

If you’re struggling with your mortgage payments and you’re about to lose your home to foreclosure, a short sale will be a very good option for you. Not only would you be able to sell your home and pay your loan, you’ll be able to avoid foreclosure as well. On top of that, the lender will shoulder all the costs including escrow, title fees, commissions, and repair costs.

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3. Am I qualified for a short sale?

Qualifications differ from one lender to another but generally, these four circumstances should be present: the value of home market has dropped, mortgage is in or near status of default, the seller is going through hardship, and the seller has no assets. The drop in the house market value should be substantial enough to make the property worth less than the unpaid mortgage balance.

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4. What type of hardship will my lender consider legitimate

Legitimate hardships would include family illness, injury, illness or injury of a family member that will force relocation, job relocation, unemployment, substantive income loss, divorce or separation, bankruptcy, and death.

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5. How do I get started to do a short sale?

Getting started on doing a short sale is easy. Contact a short sale specialist to discuss your concerns. You’d also need to round up the requirements, one of the most important of which is the hardship letter detailing the current situation that makes it difficult for you to continue with the mortgage loan.

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6. How long will a short sale take?

The duration of a short sale will ultimately depend on the lender. Some lenders can take as quick as two or three weeks while others can take as long as six months.

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7. How much will it cost me?

Short selling your home will not cost you anything since your lender will shoulder all sale-related expenses including commissions, title and escrow fees, and even home repair.

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8. Can I get any money back from short sale

The Making Home Affordable Plan and the new Home Affordable Foreclosure Alternatives have made it possible for qualified homeowners to get at least $3,000 from a short sale. This amount is given to the homeowner to use for relocation expenses. We also helped the homeowner got up to $5,000.00 from a short sale for relocation expenses.

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9. I am current on my mortgage will my lender consider a short sale?

There is no definitive answer to this question since it depends on the lender. Some lenders would only accept a short sale file for loans that already delinquent. Others, meanwhile, would consider loans that are heading towards default.

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10. Why would a lender agree to accept a short sale?

Lenders agree to short sale because they prefer it to foreclosure, which loses them more money. Apart from that, lenders have also been legally required to work with borrowers to resolve problems with mortgage obligations, especially when the borrower approaches the lender to come up with an amicable compromise. In addition to that, lenders need to maintain that image that the loans under them are performing well to be able to package and sell loan bundles to the secondary mortgage market.

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11. Can I stay in the house until the short sale is complete?

Yes, you can stay in the home until the sale is complete. But once it is, you definitely have to move.

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12. Will the bank continue their collection activities?

Yes, some banks actually continue calling and writing the borrower even when the short sale is already in process. But the bank will not be able to foreclose your property when it’s already in short sale.

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13. Will a short sale affect my credit?

Short sale is not public record. What would only appear in your credit report is “mortgage settled for less than full balance.” This along with the late payments you’ve incurred early on may affect your credit score by 50 points and above. But it’s important to note that it is still a lot bettercompared to foreclosure, which will appear on your credit history for 7 to 10 years and damage it by 200 to 300 points.

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14. Will there be a tax consequence after the short sale?

The Mortgage Debt Foregiveness Relief Act of 2007 has been designed to protect the homeowner from tax liability. That is if the short sale is done on the borrower’s primary residence.

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15. I have two loans can I still do short sale?

Yes. Whether or not the two loans come from the same lender, a short sale specialist can work to get you approval for a short sale for either loan.

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16. My property is in bad shape and needs work; can I still do short sale?

Definitely. The fact is, many lenders are even more eager to do a short sale on a property that requires repair and renovation than one that does not. That is because there is more money lost in foreclosing a property that is in bad shape.

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17. What if I am not satisfied with the terms of the short sale the bank gives me?

Working with a short sale specialist will help avoid this scenario. Look for one that is professional, efficient, and smart enough to get you terms that you’ll be satisfied with.

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18. What documentation will a lender typical require?

Lenders generally require a complete set of short sale requirements including tax returns, bank statements, pay stubs, and hardship letter.

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19. My house is going to foreclosure, will I have enough time?

Having a short sale will not stop the foreclosure process. But in some cases, a short sale specialist can help convince the lender to postpone the foreclosure while the short sale is being worked out.

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20. Will the bank come after me after the short sale?

If you are going to do a short sale, don’t forget to have it written in the closing papers that the sale will remove your liability to the bank. This way, even if there is deficiency in the balance paid, the bank will not be able to foreclose your property.

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21. What is deficiency?

Deficiency is the amount which is equal to the complete amount of indebtedness including all late fees, attorney costs, all expenses (if applicable) less the amount received by the lender from the sale.

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22. Why would I do a Short sale if could not get an approval for letter removing the deficiency balance?

Some homeowners are willing to accept an approval letter with or without a deficiency removal for the following reasons: To stop the payoff clock and stop incurring future or larger deficiency, or payoff To avoid a foreclosure on their credit To settle deficiency issues at a later date Try to do the necessary thing to get the bank the highest price possible for the home. They may also take their chances and file for bankruptcy if the lender tries to collect. Any or none of these conditions may apply to you, it is also very important to note that every homeowner has different levels of comfort and risk tolerance, You will always have the chance to review your approval letter with an attorney before selling your home and you can cancel your listing anytime.

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23. Can I do Short Sale with a Home Equity Line Of Credit as a second mortgage

Yes you can do short sale with a Home Equity Line Of Credit as a second mortgage to do a short sale, however it could be very difficult depending on your lender. It is important to know that Home Equity Line of Credit is a different type of loan, and the lender can allow you to do a short sale and release the liability on property, but they may demand a lot of money in order to do so. Because if the property were to go on foreclosure the bank could still come after the homeowner for the entire remainder of the unpaid balance

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24. Do I have to stop payment on mortgage in order to do a short sale

Every borrowers situation is different and a short sale can be done while staying current on your mortgage payments. Many short sale have been successfully closed where the borrower never missed a payment. However, we are seeing more and more investors (owners of loans) deny short sale requests, due to the fact that there have not been any missed payments. Fannie Mae, FHA, and some other investors are starting to claim this once again. The important thing to note, is that if you are able to afford your payments, you should continue making them until we devise a plan for you based on your goals and objectives. Many times in short sales you need to gather further information from the lenders to determine what they want and are willing to do, before voluntarily missing any payments. If you have a true hardship and simply cannot afford your payments, well then there is no need to worry.

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25. Do I need an attorney to do a Short sale

Not always, in some instance you need an attorney to do a short sale but not all the time, it is sometimes essential to get an attorney to review your approval letter from your lender which we can provide, so that you understand everything in it and its terms and, so you can decide if you still want to go further with the process

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26. How can I repair my credit after a foreclosure

Be sure why you were foreclosed. This is an extremely important factor in repairing your credit. If there were circumstances you could have avoided, you need to know what they were so you can fix them in the future. If it was a series of unfortunate circumstances, you want to try to avoid them in the future.Pay off your debts. Not an easy task especially if you have numerous debts. However, there are debt consolidation services you can consider–but make sure you check them out because many are frauds.Make sure you pay everything on time. This will help you repair your credit standing after your foreclosure. Most importantly Be willing to make sacrifices to pay your bills on time. The more you show that you have changed the faster you will be able to repair your credit.

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27. Do I have to include my spouse on paper work if they are not on the loan

Usually the answer is no, only when advised by your attorney and in cases where your spouse is on legal title to the property, they will be included on the on the listing paper work.

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28. If I file for bankruptcy,how would that affect the ability for me to sell my home on Short sale

Filling for bankruptcy during your short sale has the potential of delaying the short sale process, in some cases where it could take 3 month or more to get a court date.

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29. Can I do short Sale on my own

Quite unlikely, banks needa professional REALTOR to be involved.

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30. What is Deed in Lieu

A deed in lieu of foreclosure, the property owner gives the property to the lender voluntarily in exchange for the lender canceling the loan. The item transferred is the deed to the property. The lender promises not to initiate foreclosure proceedings, and to terminate any foreclosure proceedings already underway.

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