FAQ
Frequently Asked Questions
Why would my lender do a short sale?
A property in the foreclosure process becomes a non-performing asset which motivates lenders to do a short sale because they will save money and time in doing so. If they proceed with the foreclosure process, they will incur heavy expenses which can easily be avoided if they negotiate a successful short sale.
Are there any fees if you negotiate my short sale?
There are no costs to you at all. We are paid only as we complete a successful transaction.
When should I begin working on my short sale?
If you are already late on your mortgage payments, or you know you will no longer be able to make your payments, then you should begin immediately. Time is of the utmost importance, the more time we have to negotiate with the bank the greater our success rate in completing a successful transaction.
How long does it take to complete a short sale?
It varies with each lender but it usually takes between 3 to 5 months to complete.
What impact does a short sale and a foreclosure have on my credit?
A foreclosure will show on your credit report and can stay on record anywhere from 7 to 10 years, making it extremely difficult to qualify for a loan. Foreclosure can sometimes be looked at as acutely as a bankruptcy. Most likely than not, you will be required to disclose this information when applying for a job, or engaging in a property rental agreement. On the contrary, a short sale is typically listed as “debt settled for less than full balance”, or something close to that. Although that remark does affect your credit, it is much less detrimental and will usually remain on record anywhere from 18-24 months. Please note that we are not credit consultants, for this reason we strongly encourage you to seek advice from a licensed credit professional.
Can I receive any type of payment back from this transaction?
It is against the law for a borrower or anyone in his/her immediate or extended family to receive any type of payment from this transaction. By approving a short sale, the lender is already accepting a loss; therefore it would be considered loan fraud if the borrower received any compensation.
Will I have any tax liability if I choose to do a short sale on my primary residence?
Most likely you will not, but we strongly encourage you to consult with a real estate attorney and/or a tax accountant. In December of 2007 the government established the Mortgage Forgiveness Debt Relief Act, which allows property owners who use a property as their primary residence to generally not have a tax liability. In the event that you performed a “cash out” refinance on your property and did not use the proceeds to improve the property, then you may have a tax liability. An important factor to keep in mind is that if you happen to have a tax liability, it will be to a much lesser degree as opposed to the property going into foreclosure simply because the lender will lose more money. Too many people make the mistake of letting the property go into foreclosure thinking they will be released of any and all tax liabilities. This is simply incorrect. Again, we strongly encourage you to seek advice from a real estate attorney and/or tax accountant to determine your potential tax liability. You can read more about the Mortgage Forgiveness Debt Relief Act on the IRS website.
Will I have a tax liability when doing a short sale on an investment property or second home?
If you do a short sale on an investment property or second home, most homeowners can qualify for exclusions on tax liability through the “insolvency exclusion”. This may hold true for your primary residence as well. What this means is that if immediately before the cancellation of debt (when you sold your property) your total liabilities exceed your total assets, you would prove to be insolvent by the amount that your liabilities exceed your assets. In other words, if your property is worth less than what you owe and/or your total income is less than your expenses, you are insolvent. You can read more about the insolvency exclusion and see if it applies to you. Once again, we strongly encourage you to seek advice with a real estate attorney and/or tax accountant to determine your potential tax liability.
If I begin the short sale, does it stop the collection process by the lender?
No. We are simply presenting an offer and the lender still has the legal right to collect the balance from you (the client). We have found however, that if you get a collection call you can let them know that you are doing a short sale. This will sometimes stop the calls, but that doesn’t always happen. You also have the option of directing the calls to us.
If you negotiate a short sale on my property, is there any guarantee that it will be successful?
No. In order for this process to be successful, both the lender and the buyer (us) must agree to the terms of the transaction. For this reason, we make no guarantee that the negotiation will result in a successful close. Lenders are consenting to more and more short sales in this current market conditions and you have absolutely nothing to lose by trying. Foreclosure of course, is a much more damaging alternative.
