IMPORTANT!
We
DO NOT provide the services of nor do
we act as bankruptcy counselors, attorneys, lenders, accountants,
financial planners, financial counselors, nor are we a debt relief
agency.
How will a short sale affect my credit?
what are the financial consequences of a short sale?
What are the benefits to a short sale vs. walking away?
How much money can I receive from this process?
How much will a short sale cost me?
What if I filed for bankruptcy, can you still help me?
Can I stay in the property after I do a short sale?
How long does the process take?
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A short sale is when, through the sale of your home, a lender voluntarily accepts less money than what is owed as an alternative to foreclosure. They agree to this because they know they will recover more of their money sooner than if they take property back in foreclosure and resell it as a lender owned property.
How will a short sale affect my credit?
Our goal is to keep a full “Foreclosure” off of your credit report. However, it’s likely that your account will show as “Settled” once a short sale has occurred. The most common negative marks on your credit will be the 30-60-90-120 day late mortgage payments and your credit score will reflect that. If you have a 2nd mortgage, it may be charged off.
What are the financial consequences of a
Short Sale?
Keep in mind that we are not accountants, tax preparers or financial counselors. However, we do this full time so we have a very good idea of what happens. The lenders have several choices when they incur a loss on your loan:
1) They can write off the debt and send you a 1099-c for the difference. The IRS views this as a benefit to you and therefore treated as taxable income. The Federal Government has put a hold on these "phantom taxes" until 2010 for certain situations. See the IRS websites: Mortgage Debt Relief Act of 2007 and Questions & Answers on Foreclosure and Debt Cancellation for more information on this.
2) They try to collect the difference from you after the sale is complete. Sometimes they'll ask you to sign a promissory note, continue to make payments or they will sell your debt to a collection agency. It is rare for 1st mortgages and more common for 2nd mortgage lenders to do this but they almost always have the right. Always seek the advice of a local attorney about your specific situation.
3) They agree to the short sale and will release their lien from your property but ask you to sign a promissory note to payback part or all of the difference in exchange. These are typically 0%, payable over several years and can commonly be negotiated down or settled for a few thousand dollars at closing.
What are the benefits to a short sale vs. walking away?
Because your lenders receive more money than they would if the property goes all the way through foreclosure, the difference between what you owe and what the lenders receive back will be less in a short sale than through foreclosure. Therefore, any deficiency amounts or amounts you could potentially get sued for will be less through a short sale than through foreclosure.
Also, a short sale on your credit report is better than a 'Foreclosure' and lending institutions are agreeing. For example: Fannie Mae states that if you go through foreclosure and they back the loan, you cannot get a new Fannie Mae backed loan for 5 years but if you go through a short sale on a Fannie Mae loan, they'll loan to you again in 2 years. See it here as a PDF: New Fannie Mae Guidelines.
How much money can I receive from this
process?
Since the lender is receiving less than what they are owed, they will not allow you to receive any money from the transaction. If you receive money from the short sale when you lender will not allow it, is bank fraud. Of course, we are unwilling to commit bank fraud.
How much will a short sale cost me?
Although you cannot receive any money from the proceeds of the sale, our goal is that you do not need to bring any money to the closing either. All fees, including our fee, real estate commissions, back taxes and any other closing costs are paid from the new purchase price at closing. In some rare instances, lenders will not allow past HOA dues to be included or a 2nd mortgage may ask for a little more than what is being offered to release their lien. We make every effort to get his paid through every other channel possible (buyers, brokers, lenders, etc.) and only come back to ask you as a last resort.
You should always work with your real estate broker in maintaining your property while it is being marketed and this may cost money. Keeping up on utilities, water, landscaping/ grass cutting and snow removal can make a big impact on buyers looking at your house.
Can I stay in the property after I do a short sale?
No. Stay away from these at all costs! 2 big reasons are: 1) The lender will not allow you to receive ANY benefit if they are taking a loss. Your occupancy could be construed as a benefit and therefore bank fraud. 2) If you set up rent payments with the new buyer and you stop making those payments, they would have no choice but to evict you. Your 'angel' investor/ buyer would fall under scrutiny for trying to protect themselves. This is the primary source of "Foreclosure Rescue Scams" you hear about in the news.
What if I filed for bankruptcy, can you still help me?
Yes and no. If the property is still in active bankruptcy, no. Because bankruptcy is federal protection from creditors, your lenders are not allowed to discuss a short sale with you or your agents until the bankruptcy is discharged, dismissed, the court issues a relief from stay or the bankruptcy trustee allows an abandonment of asset. Once the property is out of the bankruptcy, we are happy to help.
How do
you get paid?
We contract directly with you, the homeowner, for 2% of the final purchase price. This fee is split between both you and the buyer and your portion is paid from the proceeds of the sale, just like a real estate commission. In some cases the foreclosing lender will not allow our fee to be paid from sale. Should this arise, we require the real estate brokers to contribute to cover your share of our fee so you never have to pay us out-of-pocket.
How long does this process take?
We begin communicating with your lenders as soon as we receive back your initial paperwork. However, your lender will not “open the file” until a buyer is ready and has presented a contract for purchase so marketing and finding a buyer is part of the challenge. Our brokers are trained to market your property aggressively so you can find a buyer fast.
Once the offer is presented to the bank(s) it can take between 40-75+ days for a response and up to another 30 days for the buyer to close. If your foreclosure sale date is approaching within this timeframe, don’t worry, your lender will most likely postpone the sale date and allow the buyer enough time to close assuming the offer is in the ballpark.
Fill out the online form or call us to set up a telephone appointment in which we will explain everything and answer all of your questions. After our initial conversation, we will guide you in listing your property and gathering your paperwork. We send you our document checklist, an authorization to release information, our engagement agreement and a required financial form. Once we receive these back from you, your file is officially “opened” with us.
Call us to schedule your initial conversation or if you have more questions - 303-399-7484.