Short Sale FAQ

Question: What is a Short Sale?
A short sale occurs when the proceeds of a real estate sale fall short of the balance owed on the property. In a short sale, the mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the owner. This negotiation is all done through communication with a bank's Loss mitigation department.

Question: Can I do a Short Sale myself?
Negotiating a short sale is a long and complex procedure that requires a strong knowledge of the process and should be left up to a professional. In this difficult market, it would be in your best interest to use a competent Realtor to find a buyer and negotiate the sale. Mishandling a file can cost you precious time and put you in danger of foreclosure.

Question: So if I choose to list my property with a Realtor, who pays your commission?
The bank will pay the commission along with all the other usual closing costs. A properly executed short sale should cost you nothing!

Question: I just missed a payment and I know I will miss more...how long does the foreclosure process take and is there time to do a short sale?
Typically, the process begins in the 90-120 days late area and can take an additional 4-6 months after that. Nowadays lenders are very willing to postpone or prolong foreclosure if you have listed the property and have a willing and able buyer. Hiring a knowledgeable Realtor who can handle this for you is extremely important.

Question: If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency amount?
The mortgage insurance is not there for your protection, just the mortgage lender.

Question: Do I have to have my home "Approved" by the lender prior to offering it for sale as a short sale?
No. Technically speaking there is no such thing as being "Short Sale Approved." The actual approval only happens with an accepted offer.

Question: Will I still have to pay property taxes if I do a short sale?
Property taxes will always have to be paid as part of any accepted short sale. Whether it's you or the lender depends on their policies and the specific agreement you reach while negotiating the short sale.

Question: I owe more than my home is worth and I can't make the payment. Do I have to somehow qualify for a short sale?
The simple answer is NO. If someone can't make their payment and they are otherwise insolvent, they qualify for a short sale. Note: insolvent simply means their total debts are great than their assets.

Question: Do I have to pay income taxes...I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me...the seller...is this true?
It WAS true, now it's not. Consult your Tax Attorney or Qualified CPA. Very recently the tax law was modified and now most people who do a short sale will have no taxes due.

Question: Do I have to miss a payment to do a Short Sale?
No, most lenders will consider a short sale without being in default assuming you can still show hardship and do not have the assets to pay down the mortgage.

Question: I want to do a short sale and have a 2nd mortgage, does this make me ineligible?
No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid off by the sale, then we just negotiate the terms with the second lender. Most short sales do involve 1st and 2nd lien holders.

Question: How long do bankruptcies and foreclosures stay on a credit report?
Bankruptcies and foreclosures can remain on a credit report for seven to 10 years. This is one of the main benefits of a Short Sale and also a reason why you should not wait to the last minute to do one. The more proactive you are about your situation, the better off your credit will be...

If you have any questions, feel free to contact me at (954) 441-5366 or email me @ HomeCounselor@bellsouth.net for a no obligation consultation.
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