Short Sale FAQ

What is a Short Sale?

A short sale is when the lender will accept less than the full amount due on a mortgage when a property is sold. Usually, the lender will accept the short sale to avoid the time and expense of a foreclosure. Financially the lender is actually ahead after a short sale.  Read a more in depth answer here: What is a short Sale?

Why would my lender(s) accept less than the outstanding debt?

After the lender does an appraisal on the property and discovers that the value is less than the payoff, the lender will decide if it is worth further legal actions and cost. A business decision is made to either continue foreclosure action or accept the short sale offer.  In the end it really comes down to one question, will the bank make more money accepting the offer for short sale vs. proceeding with the foreclosure.  9 times out of 10 the answer is always that the bank will make a good deal more money accepting the short sale.

Do I qualify for a Short Sale?

If you answer “yes” to any of these questions, a short sale may be the best option for you:

  • Have you experienced any hardships since the purchase of your home?
  • Do you owe more on your property than what it could sell for?
  • Do you have difficulty covering your monthly expenses?
  • Do you need funds from other sources to make ends meet?
  • Is your interest rate or mortgage payment going up soon?
  • Have you already missed a mortgage payment or are you worried that you will?

Not waiting too long to get started can be critical to the success of a short sale. Contact us now for a free, no obligation conversation to see how we can help you.

What are some examples of hardships?

  • separation or divorce
  • medical expenses
  • inability to work due to health reasons
  • business failure or decline
  • reduced income or employment
  • death of a spouse
  • rise in interest rate or mortgage payment

Please call 800.962.0444 or click here to fill out a short form and we will answer your questions.

Will the lender approve a Short Sale even if the homeowner is current on their mortgage?

YES. Banks have in the past negotiated and approved on a short sale even when the homeowner was current on their payments.

Can I do a Short Sale if I have 2 loans?

YES. Lenders will evaluate what your house is worth in the current market and then decide how much they will accept allowing for a certain amount to be paid any junior lien holders.  There is no set amount for what a junior lien holder will accept, but it is generally between 5%-15% of the balance owed.

Can I still do a short sale even if the property is in very bad condition?

YES.  Lenders are more motivated to do a short sale on a property that needs work than on a property that doesn’t. Lenders know losses start to skyrocket when they foreclose on a property that needs a lot of repair work.  Lenders are in the business of lending money not property management and home repairs.

What is the best time to do a short sale?

The preferred time is before you miss your first mortgage payment. However, if you’ve already missed a mortgage payment or received a Notice of Default or a Trustee Sale date has been set, contact us as soon as possible…when an offer from a buyer can be submitted to the lender, it is not uncommon to be granted an extension of the Trustee Sale date.  Read a more in depth answer to How Much Time Do I Need to Stop My Foreclosure by clicking on the link.

Will I have to pay the balance of the mortgage off?

No.  Depending on the number of mortgages (and types, i.e. purchase money, refinance, HELOC) your lender(s) may ask for a cash contribution or a promissory note, however, with our training it is a rare case where we cannot negotiate those demands out of the short sale agreement.  In the state of California that has become even easier with the passage of senate bill 931 which states that any first trust deeds accept the short sale proceeds as full payment and waive the balance owed. Contact us right now to discuss your particular circumstances, and we will refer you to legal and financial professionals as needed for consultation.  To find out How Much Will a Short Sale Cost Me click the link.

How will a Short Sale affect my taxes?

The Mortgage Forgiveness Debt Relief Act was signed into law in December of 2007 and may eliminate potential tax liability.  A similar law was passed in the state of California as well.  Be aware that these laws do expire at the end of 2012.  Contact us Today…we can put you in touch with tax and legal professionals as needed to answer all of your questions

How will a Short Sale affect my credit?

Financial experts advise that a foreclosure will have much longer and more serious effects on both your credit and future ability to get financing than a short sale will.

How long does a Short Sale generally take?

When the transaction runs smoothly, a short sale can take anywhere from  2-6 months, but can take more time depending on your particular circumstances, which include:

  • the number of loans on the property
  • how soon an offer is submitted to the lender(s)
  • each lender’s timeframes & procedures for processing offers
  • making sure the buyer stick through the short sale process

For a general outline of the timeframes involved in doing a short sale in the Sacramento area please read Short Sale Timelines.

To find out how long your short sale will take please Contact Us today.

If I am behind in my payments and can’t afford closing costs what can I do?

Lenders are understanding when it comes to this situation and will actually pay the REALTORS® commission and your closing costs.  Please read How Much Will a Short Sale Cost Me for a more in depth explanation of who pays the short sale closing costs.

What is the likelihood of a successful Short Sale?

The initial work we do with you is a key factor for maximizing the chance of success. The skillful handling of your file is also imperative; having one point of contact, preferably a licensed Realtor experienced with the short sale process and negotiating of debt settlements, will also increase the chances of success.

Many Realtors are tempted to try their hand with short sales in today’s market. Unfortunately, even a doable short sale can fail due to an inexperienced Realtor simply not following your lender’s specific procedures and requirements. Lenders may pay little or no attention to such files until just before they are scheduled to foreclose, at which time it is often too late to start over or to make things right.

What is Loss Mitigation?

Loss Mitigation is a process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan.

How is a Satisfaction of a Lien vs. a Release of Lien different?

A satisfaction is a total discharge of the debt. A release is when the lender releases the lien from the property which will then allow the home to be sold. (The borrower may still be required to repay the remainder of the debt.)  Please read Release of Lien vs. Release of Lien and LIABILITY to make sure that you understand the differences.  I cannot stress enough how hugely important this issue is.  If for instance your liability is not waived when you short sale your home you could be sued for the balance owed within the next four years.

What is a Deficiency Judgment?

A deficiency judgment can arise if the bank sells the house for less than the mortgage debt. The lender then holds you responsible for the unpaid portion of the loan. For instance, if you owe $100,000 to the mortgage servicer and they see proceeds after the auction of $55,000, the remaining difference of $45,000 can be moved into a judgment against you. This will also appear on your credit report along with the foreclosure. The lender may be allowed to take further legal action such as garnishing wages to pursue payment based on the laws of your state. Some states have restrictions and regulations on deficiency judgments, but unfortunately the majority do not.  To really understand this huge issue please read Release of Lien vs. Release of Lien and LIABILITY.

What is Making  Home Affordable?

The Making Home Affordable program is really a group of programs put out by the departments of Treasury & Housing and Urban Development.  The include programs that address loan modifications, Home Affordable Modification Program or HAMP; and programs for foreclosure alternatives like deed in lieu of foreclosure and short sales, Home Affordable Foreclosure Alternatives or HAFA.  To read more about HAMP and HAFA please read What is the Making Home Affordable Program.

I am a Homeowner, why should I use you?

I want you to know I’m not like most agents, I’m very different, and I’m not a typical Real Estate agent.  I’m not looking to just sell your home; I’m looking to negotiate a settlement with your bank, which is a very different skill set from just putting the home on the market and getting a buyer.  That’s the easy part.  The hard part is actually negotiating a settlement that’s fair for you on behalf of you.  So sure you could go find any agent to list your home on the market and find a buyer, but if you don’t have any equity your concern isn’t that they find a buyer who can get you the highest price but who can get me out with the least amount of liability.  So who can actually get the bank to approve your short sale with the best terms possible?  That’s the question you need to be asking yourself when doing a short sale and not just focusing on “well I need to get the highest price possible so I am going to use the agent who listed 100 properties last year”….

So the other thing I want to put out is that over the last couple of years I have looked at the statistics and only 2 or 3 out of ten short sale listings will actually close, now this isn’t because the agents cannot  find a buyer, that’s the easy part like I explained earlier, the reason the rest foreclose because the homeowners use an “agent” to sell their home and the reality is if they are doing a short sale you don’t just need an agent, you need someone who knows how to negotiate debt with the bank and knows how to get them to give you the best terms possible such as a full release of liability, to make sure there is no cash contribution, to make sure that you don’t have to accept an unsecured note for the balance of the loss.  Most agents assume that you have to have an unsecured note or cash contribution if the bank asks for it.  So there is a very big difference between working with an agent and working with someone who knows how to settle a debt.

A short sale is not a real estate transaction as much as it is a debt negotiation.  An agent would be fine if you just want them to list your home and find a buyer, but if you really want to avoid foreclosure you need an agent who has also been trained to negotiate with the bank and understands the games the bank is playing and knows how to get the bank to release you of liability, understands how to get rid of an unsecured note, knows how to push back to get the bank to not require a cash contribution and to not go after your 401k and other retirement accounts.  So the difference between another agent and me is that I actually know how to negotiate with the banks.  Most agents list the property, find a buyer and submit that offer to the bank and that’s about the extent of their experience, knowledge and understanding.  My experience, knowledge and understanding goes beyond that, when the bank sends us a counter offer or responds with a term that’s not good for you I will go and push back on the bank and explain to them how this is not a good deal for you, how you would be better off foreclosing if there is not benefit for you short sale vs. foreclosure.  I’m on your side and will not push for a short sale unless there is a benefit in it for you versus allowing the property to foreclose.

I am a Realty Professional, why should I use you?

Our strength is our expertise. We have successfully handled many Short Sales and when you refer your Short Sales to us you can focus on what you need to in order to keep your business going. The reasons are varied, depending on the individual, but here are some.

  • Referrals quickly assessed for likelihood of success
  • No fees or expenses required of you at any time
  • Listing, short sale & escrow handled entirely by licensed realtor
  • Stop spending hours and hours on the phone with the short sale lender
  • Spend your timing prospecting for new short sales
  • We pay a generous referral fee.

For more information please call the office @ 916.585.3636 to hear how we can take the weight of these short sales off of your shoulders.