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Frequently Asked Questions… Q - What is a short sale?A- A short sale in real estate occurs when the outstanding obligations (loans) and cost of selling are greater than what the property can be sold for. Short sales are a way for home owners to avoid foreclosure on their homes and still be able to pay off their loan by settling with their lender. Q Do I qualify for a short sale? A- Lenders vary in their requirements. Your first step should always be to contact your lender. However, most lenders require the following: 1.Your payment is delinquent or is about to be. Most lenders will not work with home owners who are successfully making or can continue to make their loan payments. Each lender s policy is different, so if in doubt, check with your lender. Some will permit a short sale with no delinquency. 2.You have a qualifying hardship. Examples that qualify are divorce, loss of a job, medical bills, excessive travel time to a job, etc. 3.You have no other major assets. Lenders who see home owners with large bank accounts or assets are less likely to cooperate on a short sale. Retirement funds are not typically considered as an asset unless sizeable. Q Do I have to be delinquent to do a short sale? A- No. But as lenders vary in their requirements you should contact your lender and find out their policy. Unfortunately, most lenders are less willing to settle if the loan is current without a cash contribution or promissory note. Q How long does it take to do a short sale? A- There are several stages to the Short Sale process which can be lengthy. The typical sale takes 5-7 months from start to finish. Q How do I begin a short sale? A- First we recommend you get legal counsel and tax advice. If you are current on your payments, we suggest you check with your lender to determine if you must be delinquent to qualify for a short sale. Next, fully complete your paperwork as listed on Seller Overview of Homework Needed and contact our office. We will take it from there. Q What if I don t have any money to pay the Realtor commissions? A In a Short Sale transaction you, as the seller, do not have to pay the Realtor commissions or the closing costs. The bank covers these costs. Please note there is a possible exception - the banks may not pay for any unpaid HOA fees. Q- Do you charge an upfront fee for taking my short sale? A- No. Some real estate agents or companies charge an upfront processing or retainer fee from the seller before beginning a short sale. We are one of the few that do not. Q Are there any tax ramifications to a Short Sale? A- As always, we recommend that you seek professional tax advice before any decision to begin a short sale or before foreclosure. Q- Do I have to pay my HOA fees? A- We strongly recommend that you do. HOA fees are an owners personal obligation. If they are not paid, it can result in credit damage, lawsuits, or other collection efforts. Also, Fannie Mae backed loans (as well as some other lenders) will not pay for unpaid HOA fees on a short sale. A few lenders will, but they are in the minority. This can inhibit the closing of a short sale unless one of the parties (seller or buyer) can pay off the debt at close. Q- Are there any credit ramifications to a Short Sale? A - This question is difficult to answer as a variety of factors compose a credit score. When the actual Short Sale is completed, banks have different methods of reporting a short sale. Most will reflect that your account was paid for less than the full amount. Some lenders will reflect on your credit report account settled. We do not know how each individual lender will report it. This is simply the most common language used. If your home were to go to Foreclosure you would most often see the bank report Foreclosure on your credit report. 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. Q Why do banks agree to a Short Sale? A Generally banks have found that it is more cost effective to do a Short Sale rather than foreclose on a home. Banks are not interested in owning real estate. While banks do take a loss on a Short Sale, foreclosing on a home can cost the bank 10%-20% more. Q- When should I start the short sale process? A The sooner the better. Once you can no longer pay the monthly mortgage amount or see that you soon will not be able to and if you do not wish to pursue any other lender remedies (loan modification, etc.) begin immediately. The more quickly you act, the better the odds for a successful short sale. Q Do all short sales get approved? A We cannot guarantee that we can close every short sale. Anyone who promises that is misleading you. Sometimes the banks will demand an unreasonable cash settlement from the borrower, have inflated ideas about market value, or will not halt a trustee s sale. Every loan has potentially three entities that must approve the short sale: the servicer, the investor, and the mortgage insurance company. Any one of them can dictate terms. Q What are the most common mistakes on a short sale? A Waiting too long to start the process, failing to obtain legal counsel when needed, not supplying us with a complete package, and filing bankruptcy or electing to loan modify in the middle of a short sale. 
NUMBER1EXPERT® © Homes Media Solutions™, a division of Dominion Enterprises and/or its clients. All rights reserved. All information deemed reliable but not guaranteed. |
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