Sheyenne Schultz
Realtor®







 

SHORT SALE Q&A

 

Short Sale Questions #1: What is a Short Sale? 
A Short Sale is when a homeowner's property is sold for less than it is owed and has to be approved by the lender/bank.

You owe more that what your home is worth, you are upside down on your loan. Example: You bought it for $500,000 and

home is now worth $300,000. Lender lets you sell home for the new market value of $300,000 & you walk away from your debt.

 

Short Sale Questions #2: My property is upside down. What are my options?
A. Foreclosure
 Give up the home and walk away. Property is then sold in an auction, also known as a Trustees’Sale.
B. Deed-in-Lieu
 Give the Title back to the lender. *Still shows up as foreclosure on your record. As bad as foreclosure.
C. Modification
 Negotiate with the lender to change the terms on your loan.
D. Short Sale
 Negotiate with the lender to see if he will accept the purchase price of a property for less than its owed.

 

Short Sale Questions #3: Of the three, which hurts your credit the most?
Foreclosure. You ruined the mortgage contract with the bank, and will not be able to purchase another home for at least 7 years.

Then deed in lieu, basically just as bad and once you give up deed, bank usually gives you 2 wks to vacate home.

 

Short Sale Questions #4 : If I don’t want to go into foreclosure or deed-in-lieu, how should I decide between modification and Short Sale?
Modification:
 If you want to continue to live in your current residence, then you should attempt to work with your lender to see if you qualify to modify your loan.
Short Sale: If you want to get rid of your financial distress and move on, then short sale is the other way to go.

 

Short Sale Questions #5: Is doing a modification the right choice for me?
If you are able to make your monthly mortgage payments, but it is straining your income, then a modification may work.  Most modifications will be re-adjusted for 3 months then reevaluated. It is not a long-term solution if you are deeply financially distressed.Lenders will usually modify your loan a couple of hundred dollars, hardly enough to make a change. Usually 3 out of 100 borrowers are granted a loan modification worth staying in the home longterm.

 

Short Sale Questions #6: Is doing a short sale the right choice for me?
Generally speaking, if you are no longer able to pay for your monthly payments and the difference between your mortgage price and selling price is too high to pay, then a short sale is a clean way to break off your distress. You pay nothing in a shortsale, walk away from your debt, and the bank forgives your deficit amount.

 

Short Sale Questions #7: Do I have to pay for any closing costs, agents’ commission, etc., in a short sale?
No
. When the lender approves of the short sale, they are incurring the monetary aspects of the transaction, including all closing costs, agents’ commissions, title fees, escrow, termite, warranty, home repairs. You pay zip, zero, nothing!

 

Short Sale Questions #8: Are all lenders willing to do short sales and why?
The bank already understands that they are going to incur a loss, so they want to choose the route that cushions the least loss. Short sales prevent them from having to pay foreclosure costs: acquiring the property, assigning a property manager, paying for repairs, etc. In comparison, a short sale saves them about 10% of those costs. The faster they can turn over a negative asset, the better. As of April 5th, 2010, the government is giving lenders incentives to do short sales and not foreclose on homes.

 

Short Sale Questions #9: Who is qualified to do a Short Sale?
Financially troubled homeowners who are having a hardship and are upside down on their loan.(owe more than house is worth)

 

Short Sale Questions #10: Is a hardship necessary?
Yes, whether it is financial or medical reason, the banks will not accept without one. Examples of hardships are: 
- Separation or Divorce 
- Medical Bills 
- Inability to work due to health reasons 
- Death of Spouse 
- Job Relocation 
- Reduced Income or Unemployment 
- Business Failure
-Loan adjusted to new higher rate
Etc.

 

Short Sale Questions #11: What is the difference on my credit with a Short Sale?
There is a huge difference between a foreclosure and a short sale. 
Foreclosure damages your credit anywhere from 250-500 points or more for 7-10 years on your record.
Short sale dings your credit much less, sometimes not at all depending on if you kept up your payments during short sale.

In some cases you can buy again right after your short sale, in most cases you can buy again in 18 months to 2 years.

 

Short Sale Questions #12: Do I have to be behind on my payments to do a Short Sale?
No
. You can do a short sale without being late at all. *If you keep up your payments and have credit score over 580, you may qualify for the new SHORT SALE AND BUY again program that lets you find a home to buy while you are in escrow with your current home being short sold. Call 310-429-4170 or email shy@shysells.com  for info.

 

Short Sale Questions #13: If I have already done or attempted a modification from my lender, can I still do a Short Sale?
Yes.  Doing a modification does not affect your ability to do a short sale.

 

Short Sale Question #14: Can I do a short sale without attempting a loan modification?
Yes! You don't have to attempt a loan modification at all.

 

Short Sale Questions #15: What is the Short Sale Approval Rate?
Depends on who is doing your short sale? Most lenders nowadays will approve a short sale if the borrower is in a hardship, and the property is worth less than what the borrower owes. But you DO need an experienced agent negotiating your sale.

 

Short Sale Questions #16: What is Shy's Short Sale Approval Rate?
If a seller has not backed out and if lender approves the sale, I have maintained a 100% short sale success rate!

 

Short Sale Questions #17: Why is there such a big approval rate difference between Shy's short sales versus other Short Sales?
The biggest reason is because short sales need to be carefully negotiated between agent and lenders. The art of negotiation, time, and ways of doing things does not come easily to all real estate agents, especially those without a lot of experience. My negotiator and I are experienced in doing short sales and have excellent relationships with the loss mitigation departments of the biggest lenders.

 

Short Sale Questions #18: How long does a short sale take to get Short Sale Approval?
From 2009, banks have sped up the approval process from 1-3months, which is a vast improvement from previous years. They are constantly working on improving the short sale approval time due to government support. As of April 5th 2010, with the implement of the HAFA (Home Affordable Foreclosure Avoidance)program, the average time has been taking around 35 days or less from the date your lender receives the completed shortsale package from us.

 

Short Sale Questions #19: Can I gain any equity in the short sale process?
No
. Because there is already a negative difference between the mortgage price and your home’s selling price, the bank will be reaping in any gains that happen in the selling process, if any. The bank is eating up your negative cost, so you do not get any equity from it.

 

Short Sale Questions #20: If I do a short sale, what kinds of items in my home can I keep?
Like a regular/standard sale, anything that is permanently attached to the home stays with the home. Permanently installed items that you wish to take with you or to be sold separately must be stated with the buyer before signing the first purchase contract.

 

Short Sale Questions #21: I have decided to do a short sale. How long does it take to find a potential buyer?
Once you sign the listing agreement, I let our pool of investors and my email list of buyers know about the property. An offer is made within 5 days of getting the listing, so a fully completed shortsale package can be submitted to your lender. As the bank is negotiating, we are still actively gathering other offers for your home in case the first buyer walks. This allows us to enter escrow quickly once bank comes back with an approved sale price of your home.

 

Short Sale Questions #22: That is a really short showing time; will you find a suitable buyer for my Short Sale that quickly?
Since your home will be priced at a reasonable price due to its condition, etc. below market value. There will be multiple buyers vying for the home.

 

Short Sale Questions #23: The bank is still annoying me about my home’s financial state. How should I respond to them during the Short Sale process? 
Try not to speak to your lender
. My negotiator and I are communicating with your bank. Do NOT speak to them. Oftentimes, the people that are calling you are from a different department and they are not even aware that a short sale is in process. If you accidentally answer the phone, just say you are doing a short sale and have a negotiator and hang up.

 

Short Sale Questions #24: During the Short Sale approval process, do I have to maintain the upkeep of my home?
Yes. Not only are we looking to get approval from the lender, we want to keep our potential buyers as well. After 1-3 months of the short sale, you do not want them to re-look at the home they want to purchase and think that it has deteriorated. Minor maintenance like lawn trimmings and tidiness is a must.

 

Short Sale Questions #25: Should I prepare to move out as soon as I start the short sale process, even before approval?
Before short sale approval, you do not have to prepare to find a new residence. Once you hear that your short sale has been approved and your home is about to enter escrow, is about the time to start looking for new residence. When you move out is up to you, but you must be out by the close of escrow.

 

Short Sale Questions #26: If I don’t want to do a Short Sale in the middle of the approval process, am I allowed to cancel the transaction?
Yes, as long as you cancel the transaction before the bank approves of the short sale property and both seller and buyer have signed to enter escrow. Otherwise there could be legal repercussions from the buyer.

 

Short Sale Questions #27: If the short sale does not get approved, do I have to pay for any costs?
No
. If for any reason the bank decides that they do not want to accept a short sale on a particular property, you still pay nothing.

 

Short Sale Questions #28: How long is the short sale escrow transaction time?
This is similar to regular sale escrow times. Cash transactions normally around 15 days, all other short sale escrow transactions between 30-45 days. Most banks will ask for ASAP.

 

Short Sale Questions #29: The Short Sale Buyer is asking to fix certain parts of the home. Do I have to pay?
All homes are sold as-is in a short sale. If the bank approves of fixing the home, then THEY will be the ones responsible for paying for it.

 

Short Sale Questions #30: There are a lot of fraudulent Short Sale companies out there that are promising amazing modification results. How do I tell the difference?
1. Never pay up front! It's against the law in CA to ask for any money to do a short sale or loan modification..PERIOD!
2. Definitely DO NOT give away any rights to your property title to anyone. Giving away your title does not relinquish your mortgage debt, but takes away your rights to the property. 
3. There is no such thing as a free lunch! If the short sale deal sounds too good to be true, it might just be that!

 

Short Sale Questions #31: Once the bank approves my Short Sale, do I need to pay for the deficiency (difference) of the mortgage?
Usually no, not anymore. The Mortgage Debt Forgiveness Relief Act of 2007, forgives deficit amounts in a short sale. This is not

viewed as taxable income anymore. Check with your accountant for specifics in your case. If you don't have one, I have a great accountant that is the most up to date CPA regarding short sales and tax ramifications. You cannot be chased for a deficit if you are insolvent(your debts are greater than your assets). The CPA can determine insolvency for you.

 

Short Sale Questions #32: The bank is not seeking any deficiency on my short sale. Is that considered income on my tax return?

Not anymore. Purchase money for a home is not taxable income. After your short sale, you will still have to fill out a 1099 but it is a different 1099 and shows cancellation of debt. You will still have to show where the money went, but it did not go in your pocket as income.  Doing the short sale does not absolve you from filling out the proper 1099 but you won't be chased for the deficit if you show insolvency. Again seek the advice of a CPA knowledgable in short sale tax ramifications. If your CPA does not seem knowledgable, contact me to have a CPA short sale expert speak to you.