FAQ
What is a Short Sale?
A short sale occurs when you owe more than the house is worth, and the bank is willing to settle your debt for less than what you owe. You are essentially asking the bank to accept less so that you can sell, and the bank can avoid the expense of a foreclosure.
If I short sale my home, are there any out of pocket costs for me?
When you short sale your property, generally there are no out of pocket costs for you.
When should I start my short sale?
You should begin your short sale process the moment you realize that you can no longer afford your mortgage payment. Time is critical. Do not delay. The sooner you get started, the more likely you will be able to successfully short sale your home. The longer you wait, the more interest, late penalties, and legal fees accrue. However, short sales are still possible even if you have a pending auction date.
Why do lenders agree to a short sale?
Banks agree to a short sale because it is less expensive for a bank to accept a short sale rather than go through the full foreclosure process. Foreclosures get very expensive for banks.
Do short sales hurt your credit?
Yes, a short sale will likely damage your credit. However, a short sale will likely show as a settled debt instead of an actual foreclosure and minimizes the damage to your credit. It is much better to have a short sale on your credit than a foreclosure.
How long is the short sale process?
This depends on the property and the circumstances surrounding the property. However, a typical short sale if conducted properly will take 2 to 4 months.
Do I need to use an agent that understands short sales?
Absolutely. There are many real estate agents that do not fully understand the short sale process. Often this may result in your home not getting sold before auction, or it will slow the process down considerably.
Is it possible to have my debt forgiven when the home is sold as a short sale?
Yes, it is possible. When we negotiate with the bank, we fight hard for this, and are usually successful.
Are there any other possible liabilities when I short sale my home?
Yes, it is possible for the bank to send you a 1099 tax form for the difference between what you owe on the property and what you sell it for. If you received a 1099 form from the bank, this means that the IRS would recognize the difference as income, and you may get taxed on that. However, there is legislation that might prevent this for you. Contact us and we can give you information that might help determine if you might be exempt from this tax.
It is also possible that the bank may ask you to sign a personal guaranteed loan in order to approve the sale. However, we plan for this and negotiate with the banks with the intent to avoid this.
Also, it is possible to receive a deficiency judgment from the bank once the short sale is complete. A good short sale agent will make sure (before the short sale transaction closes) that the bank agrees not to seek a deficiency judgment against the seller.
A successful short sale will avoid a deficiency judgment, keep a foreclosure off of your credit, and also minimize your tax liability.
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