Short Sale Questions

2. The Definition of a Short Sale
A real estate short sale is when a third party or homeowner negotiates a discount on the payoff amount due to a mortgage company. This happens when a homeowner owes more money to banks and/or lien holders than what the property can currently sell. In order to sell a property that is "upside down" in equity, the bank must agree to accept less than what is currently owed on the property.

3. Why Would A Lender Discount A Mortgage?
The lender looks at all of the mitigating factors when a homeowner is facing foreclosure. Most times the lender will lose money if the property goes to foreclosure because they have to pay for the following: property taxes, repairs, maintenance, insurance, lost interest payments, Realtor commissions, eviction costs, and loss severity among other items. Plus, the longer the property sits without being sold it continues to lose value and exposes itself to cases of burglary and vandalism. The short sale can be a win-win for both you and the lender.

4. Will I Owe The IRS Anything? 
In December 2007, President Bush signed into law, The Mortgage Forgiveness Debt Relief Act which provides the discharge of indebtedness of up to $2 million of taxable income from a short sale of a homeowner’s property. Visit the IRS link here for more information:http://www.irs.gov/individuals/article/0,,id=179414,00.html

5. What Is A Deficiency Judgment or Promissory Note? 
A deficiency judgment is a judgment lien against a debtor, defendant or borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage in full. This option may or may not be available to the lender, depending on whether they have made a recourse or non-recourse loan. Not every troubled borrower is hit with such a claim. In fact less than 10% of our clients are faced with a deficiency judgment or promissory note due to our ability to negotiate a settlement with enough monies to the lender to offset a need for a promissory note or deficiency judgment. 

Often, mortgage companies don't go after borrowers for unpaid amounts either because state laws prohibit or limit such actions or the cost outweighs the potential return. Borrowers subject to a deficiency may also elect to file for bankruptcy in an effort to have the debt discharged. How a borrower is treated can depend on mortgage company policy, the size of the unpaid debt, whether the borrower has a job or other assets, or whether the home was bought as an investment. 

6. How Long Does The Short Sale Process Take? 
A short sale can take anywhere from weeks to months. Every short sale is unique and the time line can be influenced by the type of loan, how behind the lender is with their short sale requests, the backing investor and other underlying factors. We will let you know how long you have to stay in your property. You can usually count on another 3 months.

7. Can I Get Money From The Sale Of My House?
No. Because the lender is taking a discount from what you owe. In addition, their acceptance letters specify no monies are disbursed to the homeowner from the sale of their home if a short sale is approved.

8. Can I  File Bankruptcy To Save My Home? 
Yes, if your financial situation has greatly improved so that you could continue to make your original payments or some kind of revised payment plan set up in a Chapter 13 bankruptcy for example. Consult a foreclosure attorney or we could refer you to one. However, if your financial position is still in bad shape, filing a bankruptcy is like putting a band aid on a broken leg. Remember a bankruptcy will stay on your credit for as long as a foreclosure, up to 7 years and more than 75% of the time delays the inevitable.

9. What Can I (the homeowner) Do To Help Speed Up The Process? 
You can provide the necessary documentation that the lender requires as soon as possible. You need to be able to take care of any requests as soon as we need them. You need to let us know if your phone numbers or email address changes so we have a way to get a hold of you.

10. Is There A Guarantee The Lender Will Accept The Short Sale? 
Unfortunately since this process is dependent upon the value of the home and a host of other factors including the investor (financial institution) that is backing the mortgage, there can never be any guarantee of success. Currently, we have a more than 90% success rate. Always be careful of anyone who declares they can guarantee success, not even your lender can guarantee the success of your negotiations.

11. Can I Live In My House While The Short Sale Is Being Reviewed?
Yes you can but as soon as the short sale is accepted you usually have a 30 day window to move.

12. What if My Foreclosure Sale Date Is Weeks Away?
 Even if your foreclosure is 1 or 2 weeks away we work extremely hard to postpone the foreclosure to buy more time to get your short sale approved and your house sold. Lenders will work with us to postpone the foreclosure because they want to avoid the foreclosure as much as you do.

13. Will My Credit Scores Be Damaged With A Short Sale?
In most cases your credit scores are already damaged because you’re 1-12 months behind (or more)on your mortgage payments. However, as the chart below shows, a short sale is much less damaging than a foreclosure with less liability for collection efforts from your lender. The short sale will stop your property from going into foreclosure which would be a catastrophe for your credit and prevent you from buying another home for minimally 5 years. 

Recently, FICO and VantageScore came out with a study covered by the New York Times which showed how consumer’s FICO scores are affected by a late mortgage payment, a short sale, or a foreclosure. They looked at a perfect credit score of 780, a moderately good credit score of 720, and a slightly below average credit score of 680, and they look at how each credit score was affected by a 30 day late payment, 90 day late payment, short sale, and foreclosure.

14. Can I Sell Items In My House Like My Cabinets And Flooring?
When one of our clients is looking at losing their home, many emotions are hard to control. Emotions like anger, despair, bitterness, uncertainty, fear and many more feelings and emotions. We have been taught to pay our bills on time, keep our credit scores high and owning a home is the American Dream. When the dream becomes a nightmare we feel as if we are losing a part of ourselves. Nothing could be further from the truth.

Your house is as much a material possession as your car or television set. Yes there have been many memories created in your home but your home doesn’t define who you are as a person. The pending foreclosure is a financial setback which in most cases is not your fault. So when you feel like ripping the cabinets out and tearing up the floors or smashing holes in the walls, you’ll do more harm to yourself (liabilities for the damage caused) and be of no help to the short sale process.
However, any items you bought for your home such as appliances, ceiling fans, etc, are your items to take with you or sell. 

15. How Does The Lender Determine How Much My Home Is Worth?
The lender will send out a local real estate agent or appraiser to conduct what’s called the “BPO” to see how your home compares against similar properties sold within the last 3-6 months. Once the lender receives this report they can begin the negotiations with our firm. We will always want to be present when the lender sends their contracted agent out to your property because we want to make sure the report is being completed accurately.

16. Why Does The Bank Need A BPO or Appraisal?
The BPO is defined as the Broker’s Price Opinion (or a mini appraisal) and is conducted by a licensed Realtor. The BPO is paid by the lender and is used by the lender to determine the value of the property. The BPO can be an external (drive by) or an internal which is more extensive.

17. Do I Need To Clean My House Before The Lender Does Their BPO?
No. This is not a showing for a potential buyer so don't worry about getting the house sparkling clean or too worried about what someone else will think about your unfolded clothes sitting in the laundry basket. The lender is more concerned about the value of the home not if there are dirty dishes in the sink. 

18. How Much Of My Information Is Confidential?
All of it. Your neighbors, friends and family will never know you’re in foreclosure, unless you tell them. Also, we will also direct your lender to call our office rather than your home with their collection calls, helping you avoid any more unnecessary stress. 

19. What Do I Tell My Lender If They Keep Calling Me?
The department calling you is the collections department and they are directed to keep calling until the loan is caught up, other payment arrangements are made (usually thousands of dollars down and then monthly arrangements) or the home goes to foreclosure. If you want, tell the people calling you are working out a short sale, however there is no guarantee this will stop the calls. Keep telling them you are working out a short sale and eventually the calls should stop.

20. Is There A “Foreclosure For Sale" Sign In My Yard When Selling My Home?
Absolutely not. Your privacy is protected unless you tell us otherwise. Your home will look and feel just like a normal house for sale with a regular sale sign.

21. How Much Do I Have To Pay You?
Absolutely nothing. We are paid by the foreclosing lender as a processing fee, by the new buyers or a contribution from the commissions.

22. Does The Lender Pay For My Closing Costs?
Yes they do. Your lender will pay for most if not all your closing costs including taxes, HOA dues, commissions and attorney fees. You will walk away from the foreclosure and get a fresh start.

23. What If I Have Other Liens Or Judgments?
Please let us know as early as possible because we will negotiate those liens and get them paid by the lender or we will take care of them from our proceeds.

24. What About A Promissory Note?
A promissory note is presented by the Private Mortgage Insurance Company (PMI) as a condition of short sale approval. This is now happening about 20% of the time. PMI was placed on the original mortgage as protection from default, especially if there was less than 20% down payment. We work diligently to lessen the impact of the promissory note or get it eliminated completely.

25. I Don’t Have Much Money Should I Pay Anything Towards My Mortgage? 
If you are short on cash each month, you should pay the following items immediately: car payments, utilities, groceries. That’s it. If you can’t pay your credit card bills, let them go for the time being because cash is the most important thing you need to take care of your family. If you are months behind with your mortgage with no way to pay it back then making 1 payment is not going to help and is money wasted.

26. Can I Ever Get My Good Credit Back? 
Yes. It will take time but you can get it back. There are even a number of credit repair companies around that are experts in repairing credit for folks who have suffered a financial hardship and facing foreclosure. A good firm with a longstanding reputation for credit repair success is Lexington Law. View their website here: http://www.lexingtonlaw.com/

27. What If I Have Multiple Lenders? 
Even if you have multiple lenders or judgments or liens we can negotiate with all of them at the same time. We are experts in getting your original lender to pay for those negotiated liens without you having to come out of pocket.

28. I Keep Hearing About Those Foreclosure Scams On TV, Is This Legit?
You should have hesitation when one of two things happen. 1. Someone asks you to sign over your deed, this is a big red flag. 2. You are asked to pay money up front for some kind of a loan modification or short sale program. You should never sign over your deed to anyone because you then lose control of your own property. You should never pay anything up front because you can work directly with your lender for a loan modification or a short sale. Our firm never asks you for money (we work for a successful settlement with your lender) and we never ask for a deed (we don’t need to). 3. We have been successfully profiled on the front of Sunday newspapers, work with some of the best Realtors across the country and locally and are nationally known for the way we have helped homeowners like yourself for more than 5 years.

29. Do I Need To Be Late In Payments For A Short Sale?
No. If you think or know there will be a financial hardship you can start looking into a short sale.

30. What About The Home Affordable Mortgage Program (HAMP) - Can I Qualify and Will It Save My Home?

This program is there to help qualifying homeowners modify their mortgage payments. There are a few qualifications for HAMP. First, you must be the owner or occupant of a 1 to 4 unit property, and you must have an unpaid principal balance equal to or less than $729,750 for one-unit properties, $934,200 for two-unit properties, $1,129,250 for three-unit properties, and $1,403,400 for four-unit properties. Other sized properties have varying rates. Second, you must have a loan that originated on or before January 1, 2009. Your mortgage payment must also exceed 31 percent of your gross monthly income and be able to document any financial hardships that are keeping you from making your mortgage payments.