Real Estate Short Sale FAQ’s
Don’t be frustrated. This page will help answer some basic questions that would normally come up when taking the real estate short sale path. Remember, when in doubt, always consult a professional.
Unlike Foreclosures and bankruptcies, a Real Estate Short Sale is the least painful way to deal with your real estate sale in the current market. With continued pressure on the value of real estate, debt obligations and high unemployment is it any wonder that we people look almost everywhere and have tried almost everything to relieve this burden? We believe your search for a REAL solution will end here today.
What is a Real Estate Short Sale?
As mentioned in another area of this website a real estate short sale is when you place your property on the market for sale at a price that is less than the current loan value. The short sale price will typically include brokerage fees and all other expenses. Effectively, the bank accepts a lower payoff amount then what you owe them to satisfy your debt obligation to the lender.
Is this the right thing for me to do?
The fact of the matter is that banks are, in ever greater numbers, willing to come to the table and give homeowners a break when faced with financial hardship. In most cases lenders are willing to settle with you simply because the foreclosure process is a lose/lose for both parties. Everyone can walk away from a short sale without losing their collective shirts. In the end the goal for both you and your lender is to limit your exposure to loss. A successful real estate short sale accomplishes this for both parties.
What are the advantages of a Real Estate Short Sale?
The advantages are numerous and wide ranging when compared to foreclosure, bankruptcy, etc… For both you and the lender involved. Here is a list in no particular order as they are all of importance.
- Lenders tend to get the highest price the market will allow through the short sale process.
- Because we review the appraisals you get from the bank and compare them to what is actually going on in the market we avoid one of the most common mistakes of a short sale.
- Foreclosures are not cheap for a bank anymore. In Florida new rules were passed making it more expensive for banks to file foreclosures documents.
- It can be shown in many cases that it is in your lenders best financial interest to accept a short sale sooner than later.
- The Court-House Auction tends to leave more properties on the table not guaranteeing a sale or the favorable returns originally contemplated by banks and title holders. Plus, they get left holding property that they are NOT equipped to manage.
- As a property owner you can protect your credit rating by avoiding foreclosure or bankruptcy.
- Our cost to you is typically nothing. We charge a real estate commission that is part of the sale price worked out with the bank.
- Foreclosures can effect your credit up to seven years
- Bankruptcies can effect your credit for up to ten years.
- Real Estate Short Sales tend to be reported by the credit agencies as mortgage paid in full helping your credit score almost immediately. This is far superior to the devastating effects of foreclosure and bankruptcy.
- Auctions tend to have unknown costs that you may have to bear at the time of auction such as deficiencies and similar types of expenses.
- Real Estate Short Sales have controlled costs and you can negotiate most items up front with your lender. That means no headaches and surprises in the future.
- The Mortgage Debt Forgiveness Act of 2007 and the IRS have rules in place to help you recover quickly
- Former home owners prefer short sales because Fannie Mae requires them to wait only two years to be eligible to own another home or even less if they were not delinquent. On the other hand, those who lose their homes to foreclosure have to wait five years minimum.
What if I have more than one Loan?
No Problem. Many people took out improvement loans and a host of other types of second and third mortgages. It is more common than not and therefore nothing to stop the process but rather another facet in the setting.
What if I have investment property that is delinquent?
Again, not a problem. The same rules apply. Almost any type of property can be sold through the short sale process. Here the question is geared more toward tax liability and and helping you understand the Mortgage Debt Forgiveness Act that was enacted in December of 2007.
What is the time frame to sell a short sale?
Depending on your market they can take between 45 and 60 days. The interesting thing about real estate short sales is that there are so many improperly marketed that you would think it impossible to sell but that is absolutely not the case. Normal market rules apply.
What about deficiency judgements?
For the vast majority of cases, we can negotiate things so that the lender does not seek a deficiency judgement. Regardless, it should be noted that every state has it’s own laws on the books for these matters and as mentioned above, you should always consult with a legal professional on legal matters.
What are the tax consequences of a real estate short sale?
In the majority of scenarios the seller is not held liable as a result of receiving mortgage relief (selling for less than mortgage value) when the property in question is their primary residence. There may be circumstances where the seller might have some tax consequences if it is an investment property. Here the question becomes reviewing your net worth and helping you understand the rules surrounding the Mortgage Debt Forgiveness Act of 2007. Also there are two IRS publications (4681 and form 982) that give clear instructions on this issue. We firmly believe most persons can be helped through understanding your position relative to these rules and structuring yourself properly to legally capitalize on this moment in time. We cannot stress enough to consult a tax professional on this subject.
What happens to my credit in a real estate short sale?
Real estate short sales are definitely less damaging than a foreclosure and bankruptcy. By any means you should avoid these. Avoiding bankruptcy and foreclosure will help you to get back to normal credit terms for borrowing, car loans, credit cards, etc., in relatively quick manner. As noted above you can even get the ability to own a home again in a much shorter time than if you go the bankruptcy or foreclosure route.
What are the hardships that justify a real estate short sale?
In simple terms any legitimate situation or circumstance that directly limits your ability to repay your lender. Here are some examples of things that have been considered justification in prior cases.
- Business Failure
- Loss of employment or reduced wages
- Health reasons that limit your ability to work
- Medical bills as a result of health issues
- Death of a spouse
- Insolvency
- ARM mortgage (Adjustable rate mortgage) that had a rate increase causing you not to be able meet your payment obligations.
- Basically, the current economy without saying it in such a broad terms.
What happens if I have a bank auction date that is only a few days away?
Give us a call! We have excellent working relationships with the investing and banking communities and there may still be time to get your lender to reconsider. In many cases we can assist you in obtaining a STAY or stopping the process by showing a better method that saves the bank money.
Why choose NDPS?
We are a trained and specialized real estate brokerage that understands the short sale process in a way that most firms simply do not. We have an assortment of foreclosure avoidance and property sale solutions available to make certain we can help distressed homeowners out of their situation. We are Nationally Certified Distressed Property Experts (CDPE). We are intimate with the current Mortgage Debt Relief Act and IRS rules as it applies to short sales. There is no secret to what we do. We work hand in hand with you and your lender(s) to get the most equitable solution for all parties. We understand the ever changing faces of the bank servicing agents and are tenacious in this regard. We work harder for you and do more.
When you get right down to it, we believe (when looking at the BIG picture) this is just a bump in the road. Our goal is to build a lasting relationship with you by helping you avoid foreclosure, protecting your credit and maintaining your dignity through a trying time with discrete, intelligent assistance.
Give us call and we can discuss your situation to see how we can be of immediate assistance to you.
We look forward to helping you!
