As an agent with the CDPE® (Certified Distressed Property Expert) Designation along with the PSA (Pricing Strategy Advisor) Designation, I have a strong and unique appreciation of the factors affecting the market, and know that there are options available to you. If you are facing foreclosure, a short sale may be an option for you if you do not have enough equity to pay off the existing mortgage amount on your property. The best thing to do initially if you are facing foreclosure is to contact your lender to see what your options are. If you have enough equity in your property, and you have exhausted other options, the best decision may be to sell the house. Please feel free to contact me anytime to discuss your situation and your options with no obligation and with complete confidentiality.
Short Sale/Foreclosure FAQ's
What is a Short Sale?
In the world of Real Estate, a short sale refers to the sale of real property for an amount less than the amount owed on the property. In the short sale scenario, the bank agrees to accept less than the full balance due on the debt, and usually ‘forgives’ all or a portion of the difference.
How will the Short Sale affect my credit?
Banks have the option of submitting the short sale to the credit bureau as "Paid in Full" or "Settled for less than full balance". As far as your credit score is concerned, if there is any effect, will be much smaller than having a bankruptcy or a foreclosure on your credit file. In a short sale, the lender is simply allowing you to pay less than you owe! That is not the case with a bankruptcy or foreclosure.
If you are currently behind on your mortgage or facing foreclosure, the short sale will actually help your credit! How? Because once you are approved for the short sale, all collection activity will STOP and you will avoid foreclosure!
Who benefits from the Short Sale?
Short sales are a win-win situation. Lenders, Mortgagees and Realtors all benefit from the successful short sale. Mortgagors get the majority of their money back, Mortgagees get the relief they need and are able to sell their property and avoid foreclosure, and Realtors can facilitate the transaction and receive compensation (commission) from the sale of the property.
Why would banks forgive the difference?
To mitigate their losses, banks often accept a settlement of less than what is owed on the property. When faced with the option of getting the property ‘back’ through foreclosure, a short sale often makes a much wiser business decision for the bank.
This sounds too good to be true!?
Not really. Things that are ‘too good to be true’ usually don’t make good economic sense. The short sale makes good common and financial sense for the banks who grant them. The fact of the matter is, Mortgage companies and banks are NOT in the real estate business. They are in the LENDING business. The last thing they want is that property back.
Can FHA, Conventional or VA loans receive a short sale?
Why does my property have negative equity?
Here are a few common reasons:
What is Negative Equity?
Also known as being "upside down" negative equity is the difference between the value of an asset and the outstanding portion of the loan taken out to pay for the asset, when the latter exceeds the former. For example, if your car is worth $10,000 and you owe $15,000 on it, you would have a negative equity of $5,000. Negative equity can result from a decline in the value of an asset after it is purchased.
Some areas decline in value. In other areas, prices may remain flat so that the properties in that area do not appreciate. If a seller wants to sell within 2-3 years of purchasing their property, they may be in a situation where they have negative equity.
What if I owe what my home is worth?
Even if you owe exactly what your home is worth, you may still need to do a short sale in order to pay for the costs of the sale (Realtor fees, Title Policy and other seller closing costs).
Why not just let my lender foreclose?
NO! What is the first thing banks do when they foreclose on a property? Hand it over to a real estate agent to get rid of it quick! The foreclosure process is a legal process. It involves attorneys and it costs MONEY. Once they get the property back via foreclosure they must often sell it for MUCH LESS than market value and pay Realtor commissions and all customary closing costs. Doesn’t it make more sense for them to take at or a little below fair market value before foreclosing?
And, even when they do sell it through foreclosure... this does NOT remove your obligation to repay the remaining balance! It is not wiped away!!!
What if I'm not behind on my payments?
Short sales work – even if you’ve never missed a payment! Yes, I know… short sales have gotten a stigma of being only available for folks who are in foreclosure. But it is possible to successfully negotiate a short sale for folks who have never missed a mortgage payment! They just happen to be in a negative equity position and need the short sale in order to sell their home.
How long does it take?
Short sale approval can take 60 days or longer.
What if my home is already in foreclosure?
Your foreclosure sale will may be suspended during the short sale process. That's why it's imperative that you contact us right away!!!
Will my lender send me a 1099 on the debt forgiven?
In 2007 the U.S. Congress passed the Mortgage Debt Forgiveness Relief Act. On December 18, 2015, President Obama signed a bill that extended the Mortgage Forgiveness Debt Relief Act through December 31, 2016. That relief has expired and been extended several times. The latest extension, enacted in February 2018, provided retroactive relief for debt forgiven through December 31, 2017. It is best to speak to your tax adviser to see how your short sale will affect your taxes for both your personal residence and any investment properties that you own that are also affected.
How much will the short sale cost me?
Our fee will be paid by your lender.
What kind of marketing will you do on my property?
On our regular listings as well as listings that are in foreclosure but are not short sales, we do employ an extensive marketing plan, including flyers, virtual tours, open houses, showing feedback surveys, etc. to generate offers as quickly as possible.
What generates success on our short sale listings is over 90% dependent on the property’s PRICE. We typically review the pricing and make adjustments every week or so until an offer is generated.
In addition to pricing, we employ a strong internet marketing presence. Through Keller Williams, your home will be exposed to over several hundred websites.
If there are very few calls or showings, then we will need to adjust the price until we get an offer. We typically generate an offer within 30 days, unless the property is very unique.
Do you think I should just do a loan modification instead of a Short Sale?
If you desire to keep your home and can afford to make the monthly payments, then YES you should keep it! In order to qualify for a loan modification, you will need to demonstrate to the bank that you are generating more income than your current monthly expenses.
Is this the case? If so, you will need to call your lender and let them know you want to do a loan modification, and see if they will qualify you for their loan mod program. If you aren’t approved, we can then move forward with a short sale. We can’t work the short sale at the same time you are working with your bank on a loan mod.
Can I lease out my house while we’re waiting on the short sale?
We don’t recommend that you lease your home while waiting on the short sale to be finalized. Lenders will not be sympathetic to sellers who are collecting rent payments and not making their mortgage payment. Also, homes with tenants are subject to legal rules (tenant rights) and much more difficult to show and to sell.
How will you decide on the list price of my home?
Initially we will set the price based on extensive market analyses. Once we have an offer we will submit that to the bank. Once we convince the bank to agree to do a short sale on your home, they will hire their own independent appraiser who will come out and view your home, and set a valuation that will be based on its condition and location.