QUESTIONS ABOUT SORT SALE.. 

What is a Short Sale? 

A short sale is when a homeowner in financial distress owes more against the home than what the home is worth, and the homeowner MUST sell.
If the homeowner does not have to sell, or does not want to sell their home, there are MANY options available to homeowners. They could move into a more affordable home and rent out their existing home, they could take on a roommate, they could refinance (although this is not always the best path. Homeowners in a short sale situation are often in financial distress, which means higher rates and fees because you’re seen as a higher credit risk to a new lender), they could talk with their existing lenders to re-configure the terms of the loan.
Selling short means you’re asking the underlying lender(s) to accept less than their payoff in order to facilitate a sale of the home, instead of foreclosing on the home.
Foreclosure is expensive for a mortgage lender. Mortgage lenders are not in the business of foreclosing on houses. Banks and lenders are in business of making loans. They don’t want the house back. This is a business decision for the lender. Which means it has to make rational, logical sense.
Homeowners, you will be asked to prove financial distress. This means you will have to submit proof that you don’t have the money to make up the shortage. If you do have the money, this is no longer a short sale, the industry calls this a “seller to bring cash in at closing” sale.
If an “angel” investor offers to ‘take over the payments’ and lets you pay rent until you’re back on your feet, and then asks you to sign a quit claim deed, transferring title to the investor, stop everything and go get some legal advice immediately. You might be thinking: I’m in financial distress; how can I afford legal advice? Contact your local bar association for a referral to free legal aid. A quit claim deed transfers interest but not liability. This means you are still liable to make sure the mortgage is paid, and further, transferring yourself out of title means your lender might decide to call your note due and payable. There are many foreclosure rescue scams to be careful of. If the rent is set too high, thus not allowing you to really get caught up at all, this has a name: equity skimming. Go see an attorney.
Homeowners: Go see your favorite tax attorney or CPA for tax advice if you are in a short sale scenario.
Homeowners, the worst mistake you can make is to go into denial and stay in your “happy place” and not make those hard decisions. Let’s review. The best steps you can take are preventative. When you see yourself getting close to needing to sell in order to avoid foreclosure:

1) Decide if you absolutely must sell or if you’re better off riding out the financial tough road. If there’s a light at the end of the tunnel, and you don’t want to sell, perhaps you’re better off not selling.  

2) Don’t ignore letters or calls from your lenders. I recommend renting and watching the movie HOUSE OF SAND & FOG to wake you up from your state of denial. Talk to your lender.  

3) If you’re committed to selling, interview a real estate agent that specializes in Short Sales or Foreclosures  

4) Always seek advice from a tax advisor if you are a short sale homeowner.  

Frequently Asked Questions  

• What is a Short Sale?  

• Is a Short Sale right for me?  

• If I do a Short Sale, how much will I have to pay to sell my home? 

• How do I get started on a Short Sale?  

• How long does it take to complete a Short Sale?  

• What tax liabilities will I have as a result of a Short Sale?

• What sort of hardship would my lender consider legitimate?  

• I am current on my mortgage; will my lender consider a Short Sale?  

• I have two loans; can I still do a Short Sale?
• My property is in rough shape and needs work; can I still do a Short Sale?  

• I am concerned about my credit, how will a Short Sale affect my credit?  

• Why would a mortgage company agree to accept a Short Sale?  

• Can I simply deed my property to someone else and avoid the hassle?  

• Do lenders approve all Short Sales?  

• My income problem was temporary. Do I need to sell my home?  

• What is a Forbearance Agreement? 

What is a Short Sale?

A Short Sale is the sale of a home when sales proceeds do not fully pay off the existing loan(s) and lender(s) accepts a discounted payoff to fully satisfy the loan.
The best part, the existing lender pays virtually all sales costs, including commissions, escrow and title fees and repair costs. You get your home sold, the loan(s) paid off and you avoid foreclosure.  

Is a Short Sale right for me? 

Mortgage lenders are increasingly willing to work with borrowers faced with a financial hardship to accept a discounted payoff on a mortgage. If you are faced with a hardship that makes it likely you will be unable to meet your obligation on your mortgage, your lender would prefer to settle the matter with you as opposed to taking the property through foreclosure.
As you consider the option of pursuing a Short Sale, remember your lender is looking to limit any potential loss on your loan. By completing a Short Sale, your lender has arrived at a solution that is, for them, much better than a foreclosure.
Bottom line, your lender wants to work with you.  

If I do a Short Sale, how much will I have to pay to sell my home? 

Nothing. It’s true; in most cases you will pay literally no sales costs if your lender approves the Short Sale. All commissions, title and escrow fees, and even most repair expenses are paid by the lender as part of the Short Sale approval. We will include the *following clause in the contract.
"Seller’s agreement to sell is subject to approval by existing lender of a Short Sale at no cost to Seller. Seller shall not be required to deposit funds to close escrow."
Remember, lenders approve Short Sales and accept the resulting loss in an effort to avoid bigger losses through foreclosure.  

How do I get started on a Short Sale? 

It’s easy. If you would like to get pre-qualified for a Short Sale simply contact a member of The Maggie Dasilva’s Team to discuss your options over the phone and set an appointment to meet in person. There is no charge to you to get started.  

How long does it take to complete a short sale? 

Although response times vary from lender to lender, it can take two weeks or as long as 60 days to receive an approval of a short sale from a lender. It will take 30 days after the lender approval to close. This is why it is critical that buyers and their representative understand and accept that time frame before they make an offer. Patience is the key.  

What tax liabilities will I have as a result of a short sale?

One often overlooked aspect of a short sale is that current a seller must count any amount forgiven by the lender as income and pay taxes on that income, even if no actual money was received. The IRS currently requires lenders to submit a form 1099 stating the forgiven amount. Sellers who meet the IRS definition of insolvency (either bankruptcy or with debts exceeding assets) will not have to pay the taxes on the forgiven amount.  

What sort of hardship would my lender consider legitimate? 

To some extent, that will depend upon the mortgage company considering the Short Sale request. Generally, so long as the hardship is real and the mortgage company believes the loan is likely to become delinquent as a result, the Short Sale request will be processed by the Loss Mitigation Department. A big key to getting Loss Mitigation to accept a hardship is to submit a strong hardship letter. The hardship letter sets the tone for the entire file.
Below you will find a list of “hardships” that are common and frequently accepted by mortgage lenders.
• Family illness or injury
• Illness or injury in the extended family – particularly if it forces relocation
• Job relocation when the property is equity deficient
• Job loss or significant income loss
• Divorce or split of domestic partners
• Adjustment in mortgage payment or unforeseen increase in living expenses  

I am current on my mortgage, will my lender consider a Short Sale? 

The answer is, maybe. Some lenders will accept a Short Sale file for approval on loans that are not delinquent. Other lenders will not accept the file until the loan is delinquent. The Maggie DaSilva’s Team can work to FIRST find a buyer for your home and prepare a Short Sale file together and submit it for approval. (Remember, there is no charge for this). That is the best way to determine if your lender will accept a file for approval on a loan that is current.  

I have two loans; can I still do a Short Sale?  

Yes. We can work with both lenders (many times the same lender hold the 1st and the 2nd loans) to put together a Short Sale transaction. Even if the value of your home is below the balance of the 1st mortgage, we can normally get the two lenders to cooperate. In the end, neither lender wants to own another home through foreclosure.  

My property is in rough shape and needs work; can I still do a Short Sale?  

Absolutely. In fact, lenders are more motivated to do a Short Sale on a property that needs work than on a property that doesn’t. The lender knows the risk of loss goes up when they foreclose on a property that needs lots of work.
Aside from expense of completing the work, lenders are simply not set up to get the work done. They are in the loan business, not the fix- it business.  

I am concerned about my credit, how will a Short Sale affect my credit? 

The big key here is to avoid foreclosure. By nearly any measure, a foreclosure is the most damaging event your credit status can encounter - worse than bankruptcy. In the course of getting your short sale approved you may miss your mortgage payments, and these will show on your credit.
By avoiding foreclosure, you will likely be able to resume normal borrowing (car loans, credit cards, consumer goods and such) relatively quickly  

Why would a mortgage company agree to accept a Short Sale?

There are actually several reasons why a mortgage company would approve a Short Sale payoff, including the following;
Return on Investment – a Short Sale often has a better ROI to the lender than foreclosure. The national average cost of foreclosure to the lender is $60,000 and could take up to 18 months with no guarantee they will recoup their money at an auction. The average savings a lender sees from a short sale property compared with a foreclosure property is $14,000. Not only does the lender receive this savings, they are also paid on the loan 6 months earlier than in the foreclosure process.
Legal Concerns – Mortgage lenders have come under legal pressure to work with borrowers to equitably resolve situations where borrowers are unable to meet their mortgage obligation, particularly when the borrower makes an effort to arrive at a compromise solution.
Wall Street is Watching – Mortgage lenders rely heavily on their ability to package and sell bundles of loans on the secondary mortgage market. They need to sell these bundles of loans in order to put the funds back to work by loaning the money again and collect loan fees along the way. If mortgages perform poorly after they are sold it could impact the lender's ability to sell their loans on the secondary market. A successful Short Sale gets the loan payoff resolved quickly.
Asset Management Expenses- If a lender acquires a property through foreclosure, the property will be managed until it is repaired and resold. It is expensive to manage real property assets such as homes. Keeping properties maintained, keeping utilities on, making repairs and the administrative costs attached to these activities are all costs the lender would prefer to avoid. A successful Short Sale eliminates most of these costs

Reserve Requirement- Delinquent and non-performing loans place another burden on mortgage lenders. For all delinquent and non-performing loans lenders must set aside funds in reserve to deal with potential losses. These funds cannot be put to work generating new loan fees until the bad loans are resolved. A successful Short Sale lets the lender put more money to work.  

Can I simply deed my property to someone else and avoid the hassle?  

Deeding your property to someone without paying off the loan is nearly always a bad idea. In the first place, the lender still considers you primarily responsible for payment on the loan. If loan payments do not get paid, or if the lender ultimately forecloses, this will show on your credit.  

Secondly, when you deed your property to someone else, you give up control of the property. Along with the deed goes the ability to control the property.
Do not deed your property to someone without paying off the loan unless you have consulted with an attorney.  

Do lenders approve all Short Sales?

In a word, no. That is why it is critical to work with someone that has extensive experience at getting Short Sales approved like The Maggie Dasilva’s Team. From the presentation of the Short Sale package to the lender to working with the lenders Loss Mitigations Department, we know how to keep the file moving towards approval. The first step is to get pre-qualified for a Short Sale. There is no charge for this, and it’s easy. Just call The Maggie DaSilva’s Team today to review your options and get started before it is too late.  

My income problem was temporary. Do I need to sell my home?  

You may be able to keep your home. You need to convince your mortgage company of two things:
The problem that caused the mortgage payment disruption was beyond your control – illness, injury, temporary disability or forced job changes are a few examples
You are now solidly in a position to stay current on your mortgage payments and make some progress towards making up the delinquent amount.  

What is a Forbearance Agreement? 

A Forbearance Agreement is a written agreement with your mortgage company in which you arrange to keep your home. The agreement will normally include two primary elements:
The borrower’s promise to remain current on the mortgage going forward
Some plan for making up the delinquent interest and other charges. It may mean making additional payments to the mortgage company or the delinquent amount could be added to the loan to be paid later.
Are you new to the area? Request our FREE package of Sarasota, North Port, Punta Gorda, Port Charlotte, South Gulf Cove, and Venice relocation information. It's our job to help! There's no obligation, and we promise to respond quickly...