Frequently Asked Questions About Short
"Short Sale" is a relatively new expression
to many homeowners, yet this type of sale has
been part of the real estate market for many
years. Unfortunately, most Realtors are not
familiar with the process, which has caused a
lot of confusion in the community, with
homeowners and even other Realtors. Because
we are Certified Distressed Property Experts, we
thought it would be prudent to explain and
dispel some of the misunderstandings.
What Is A Short Sale?
A Short Sale is when:
- A homeowner is authorized, by the bank,
to sell for less than what is owed on the
- The lender authorizes or accepts the
sales price as a payoff.
- The seller avoids a credit-destroying
foreclosure, and sometimes they can also
avoid a deficiency judgment.
The seller will not receive any money at closing,
yet they will avoid the financial and emotional
damage that a foreclosure can cause. During our
negotiations with the bank, we work to include a
favorable wording for the forgiven debt of the
mortgage, which can help the recovery of the
homeowner. And we're able to do so in many
Why Would A Lender Agree To Lose Money?
- A lender loses significantly more money
if they have to incur the additional
expenses of a foreclosure, as opposed to
accepting a short sale.
- Lenders are in the business of lending
money, not owning homes. The more money they
have tied up with a property that they own,
the less they have to lend out.
How Does A Short Sale Help Me?
- It helps you avoid a credit-destroying,
and an emotionally draining foreclosure
- Avoiding a foreclosure will help save
your credit. Typically a foreclosure will
drop your credit score up to 300 points per
- You avoid having a foreclosure on your
credit report anywhere from 10 to 15 years,
which affects your future purchasing power
and interest rates.
- It could help you avoid a deficiency
judgment from the lender after the
foreclosure, as they try to recover their
I Have Already Received My Foreclosure
Notice. Is It Too Late For A Short Sale?
- The short answer is no. There are a few
variables, though, that can affect the
- A qualified Realtor, or better yet, a
Certified Distressed Property Expert, can
help you extend the foreclosure timeline up
to 6 months, and in many circumstances up to
7 or 8 months.
- A home sale can be done and approved, up
to the day of the bank sale, or auction of
I Have Not Missed Any Mortgage Payments.
Can I Still Do A Short Sale?
- Oftentimes, the lender will not consider
a short sale if there have not been any
missed payments. That issue can be overcome
if we can show a compelling reason
(hardship) why the payments have been made,
and why the payments are going to stop in
the near future.
- We would need to show how the payments
were made, and where the money came from. If
the payments were made with your credit
cards, by borrowing from family members, or
even if the money came from retirement
accounts, as an example, it would help build
the case. This will not guarantee that the
lender will accept the short sale, however,
there are instances where they have done so.
How Do I Pay The Realtor Commissions,
Taxes And Other Expenses Associated With A Home
- The homeowner does not pay any of the
expenses associated with the sale of the
home, such as commissions and other closing
costs. Those expenses are paid by the
lender. They are, however, included as part
of the total shortfall that the owner would
be responsible for, if the bank is
successful with a deficiency judgment or
- The bank may ask the homeowner to reduce
the lender's loss by making a payment, if
the homeowner has any "extra" money in
savings accounts, etc., or by signing a
- In December 2007, President Bush signed
into law, the Mortgage Forgiveness Debt
Relief Act, which eliminates the capital
gain income tax that used to be levied on
the forgiven portion of the primary
residence's sale. The tax is still in effect
for second homes, and investment properties.
To speak confidentially
with Kathie or Wayne about your options,
simply contact us now.