Frequently Asked Questions from Homeowners/Sellers
Simply put, a Short Sale is used to describe the sale of a home in which the homeowner owes the bank more than the home is worth. The bank agrees to allow the home to be sold for less than what is owed (AKA “Short Sale”).
Yes. Contrary to popular belief, it is not difficult to qualify for a Short Sale. A good Short Sale candidate has no equity in their home. They are not able to sell their home and pay off all of the outstanding loans/debt that are secured against their property.
If you owe more against your home than it is currently worth and want or need to sell it but can’t or won’t bring cash to closing to make up the difference between what you owe and what your home is worth, then you are a prime candidate.
What groups of people do you specifically work with?
I successfully close on Short Sales for the following groups of people…
1. You are behind on your mortgage payment and are unable to keep up with all of your monthly obligations. Some of the reasons for falling behind on your mortgage payment may include sudden change in monthly household income, loss of job, divorce, and more.
2. You are NOT behind on your monthly mortgage payment but know that you will soon be unable to keep up with all of your monthly obligations and therefore in the near future will not be able to afford to keep your home.
3. You are NOT behind on your monthly mortgage payment but need or want to move. Reasons could include a job transfer, a health reason, retirement, and more.
4. You are NOT behind on your monthly mortgage payment and have come to the decision that staying in your home is not a good “business decision” or “financial decision.”
How do I select the right Realtor or Team to successfully manage and negotiate my Short Sale?
Before hiring just any 'Agent' to assist you in a Short Sale, make sure they are qualified and understand all the work that is required to see you through to the end. A properly trained Short Sale Agent knows how to qualify you for a Short Sale transaction and therefore has a very high success rate. Make sure that they have been trained and educated in short sales and have obtained their C.D.P.E. or L.M.C. Designation. Most Realtors®, Investors and Real Estate Agents do not understand how to qualify you and your lender for a Short Sale Transaction. This is one of the reasons they often have such low success rates when it comes to closing a Short Sale. Investors have around a 10% success rate. Most other so called 'Short Sale Specialists' have between a 20-50% success rate. I have over a 96% success rate.
Be smart and make sure that you ask many questions before trusting your future, your credit and your financial situation with a self-proclaimed 'Expert' that may have a “special designation” after their name and just learned about Short Sales from a Title or Escrow Company, a Real Estate Seminar, or their Broker.
I am the premiere Short Sale agent in the Bristol / Plymouth County area. I have been negotiating Short Sales for several years now. I have successfully closed numerous of short sale transactions with a 98% success rate – numbers unmatched in the Bristol / Plymouth County area. Homeowners hire me because they understand the value that I offer. This value comes from my experience, process, and results.
Do you work with all banks?
Yes, I work with all banks. Unlike some agents and investors, I do not “selectively choose” which banks I work with and which banks I won’t. I have experience in working with over 50 different banks/lenders across the United States.
This simple answer is that it takes approximately 6-9 months to complete a Short Sale from initial contact with you as the customer to closing.
There are several stages that are involved with the Short Sale process...
1. The first stage requires working with you as the homeowner to get all of the required documentation that your bank will require me to send them – I refer to this as completing the Short Sale Package. This stage shouldn’t take longer than a couple of days but this stage lies solely in your hands (to get this process started right away, please complete the Short Sale Request Form )
2. The second stage involves me preparing the listing paperwork and scheduling an appointment with you to see your home and prepare your home to be listed for sale. This stage only takes a few days as well.
3. The third stage entails me aggressively marketing your home for sale and producing a willing, ready, able, and committed buyer. This stage can take as little as a few days or as long as a few months. On average I receive offers on my listings within 60-90 days.
4. The fourth stage is the actual presentation of the offer to your bank. This is where my expertise and experience in negotiating Short Sales takes place. The actual negotiation/approval process can take as little as 30-45 days or as much as 90+ days. On average most Short Sales take between 60-90 days from the date the offer is presented to the lender to the date of the Short Sale approval. In most cases, 75-90 phone calls, emails, and faxes back and forth between the lender and myself are required. The process would not typically be described as “fast” on the banks side of things, but with the right agent working on your behalf, you can be at rest knowing that everything is being handled diligently and with much care.
5. The fifth and last stage to the Short Sale process is the period of time between Short Sale approval from the bank and the buyer closing on the home. I prepare all of the buyers that I work with to be ready to close in as quickly as 3 weeks from the time of Short Sale approval. Often buyer’s will even close in as little as 10-14 days. If you are still living in the home at time of Short Sale approval, it is imperative that you move out within 3 weeks from Short Sale approval.
Are there any fees associated with doing a Short Sale?
Yes, there is 1 fee associated with doing a Short Sale. The great news is that the bank pays for this fee…
1) Realtor Commissions: A fee of 6% of the sales price of your home that is paid for by your bank/lender.
Are there any tax ramifications to a Short Sale?
There may be tax ramifications to a Short Sale but this is a very “loaded” question. You may have heard, "Don't do a short sale because you will get a 1099 and have to pay taxes on the difference between what you owed on your home and what you sold it for or the amount the bank wrote off." This may be true, but this is not the whole story…
If you borrow money from a lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount as income for tax purposes, depending on the circumstances. When you borrowed the money you were not required to include the loan proceeds as income because you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is normally reportable as income because you no longer have an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.
The thing that most people don't know or don't tell you is that with a Foreclosure, you will also get a 1099. In the case of a Foreclosure the 1099 is called a “1099-A.” So what's the difference between a 1099-C and a 1099-A? The 'C' stands for "Cancellation of Debt" and the 'A' stands for "Acquisition or Abandonment of Secured Property". The differences are much more than you get the 'C' with a Short Sale and the 'A' with a Foreclosure. It is important to know that while there are many differences, the tax consequences for the 'C' and the 'A' are the same. You may not even be required to pay taxes on the 'income' as shown on the 1099-C, but don't just assume that you won't have to pay. While we are very good at successfully closing Short Sales, we are not tax experts. More detailed information regarding the possible taxes can be found here.
Before making your final decision, first consult a CPA or Tax Preparer .
The Mortgage Debt Relief Act of 2007 provides relief to many, many homeowners. For more information on the Mortgage Debt Relief Act, how it works, who it applies to, and more, please read more directly from the IRS website by clicking here .
One more thing you should know is that in approximately 99% of the cases, the amount of the loss at Foreclosure is greater than that of a Short Sale. If you are going to receive a 1099 in either case, it is in your best interest to do a short sale instead of allowing your property to be sold for less at Foreclosure or as an REO (Real Estate Owned or Bank Owned Property). Now that you know this, don't allow rumors and incorrect information to influence an important decision in your life. Losing your home to Foreclosure is always the last resort and you should seriously look at all of your options before letting your home go to Foreclosure.
Are there any credit consequences to a Short Sale?
This question is asked very frequently and has many different variables involved. The first thing to keep in mind is that the moment you go 30+ days behind on your mortgage payment, your bank has the right to report to all of the credit bureau’s that you are 30 days behind on your payments. When a late payment is reported to the three major credit bureaus, it does have a direct affect on your credit. After going through a Short Sale or a Foreclosure, most people have multiple 30, 60, and 90+ day late payments reporting on their credit report.
When the actual Short Sale is completed, most banks will report to your credit report that your account was “paid in full for less than the full amount.” Your credit report may also be marked as “settled.” It is important to keep in mind that each lender has a different way of reporting that a Short Sale was done, but this is the most common language that is seen. If your home were to go to Foreclosure you would most often see the bank report “Foreclosure” on your credit report.
It is difficult to gauge how much of a credit scoring affect a Short Sale has vs. a Foreclosure. Credit experts will agree that neither a Short Sale nor a Foreclosure is favorable to your credit or credit score, however, the impact of a Foreclosure is much worse. We strongly advise you to work with a Credit and Credit Scoring Expert for more specifics on this topic, and ways in which to improve your credit after the Short Sale is complete.
Recently, several of my clients were able to Short Sale their homes without ever missing a payment, therefore, they do not have any late payments reporting to their credit. When there are no late payments on your mortgage, your credit score is generally not affected. It is possible to maintain a high credit score by completing a Short Sale without missing payments on your mortgage and other bills. Please be aware though, that your lender will still report that a Short Sale was done so while you may not see your credit score drop if you continue to make payments through the completion of the Short Sale, you’ll still likely have your account marked as “paid in full for less than the full amount” and/or “settled.”
Why exactly would a bank agree to a Short Sale?
It is much more cost effective for a bank to do a Short Sale rather than Foreclose on a home. Banks are not interested in owning real estate. Banks make their money from receiving monthly mortgage payments. While banks will take a loss doing a Short Sale, they can often minimize their loss by as much as 10-40% over a Foreclosure.
Can the bank sue me or place a judgment against me for the difference between what I owe and what the home sells for?
In Massachusetts the lender retains the right to seek a deficiency judgment, but there is a strictly enforced time period for accomplishing this purpose, as well as strictly enforced procedural rules. If the lender fails to act within the time period, or if the lender fails to give proper and timely notice to the defaulting borrower, any deficiency is waived. For more specifics on this topic please consult a qualified Real Estate Attorney .
It is also important to know that most Home Equity Lines of Credit (HELOC) are not just secured to your home, they are also personally “backed” by you. What this means is that even though your HELOC bank may agree to do a Short Sale or Foreclose on your home, they still may attempt to collect on your account – even after the Short Sale or Foreclosure is complete.
It is true that you may have heard this from one or more Realtors – I certainly have – however, it is not accurate. Most Realtors are not educated on how to successfully close a Short Sale, in fact the national average for closed Short Sales by Realtors is between 20-50%. Reference back to How do I select the right Realtor or Team to successfully manage and negotiate my Short Sale? before believing others’ “negatively-tainted” opinions on Short Sales.
I’m behind on my payments, how long until the bank forecloses on my home?
Most notes (the “I Owe You” document that you signed with the bank when you first qualified for your loan) give the bank the right to file the “foreclosure notice” or the “notice of default” as soon as you are 30 days behind on your mortgage. While the bank has the right to file the “foreclosure notice” or set the trustee sale date (the date your home will be foreclosed on) as little as 30 days after you miss your mortgage payment, they often will not do so until you are 90 days or more behind on your payments. The bank has the sole discretion on when they want to file the sale date and all banks make this decision differently and within different time parameters. Recently many banks have elected to hold a foreclosure moratorium (suspension or freeze of filing foreclosure notices) therefore greatly affecting at what stage they file the “foreclosure notice.”
When the official “foreclosure notice” is filed (whether it is filed after you miss 1 mortgage payment or 3 mortgage payments), there is a 91 day period of time between the filing and the actual “foreclosure sale” or “trustee sale.”
It is important to know that if you are working on a Short Sale, it does not mean that the lender will put a “stop” on the foreclosure process. Most lenders will continue with foreclosure proceedings even if a Short Sale is being reviewed or worked on. I consistently get foreclosure sale dates postponed/delayed when we are in the Short Sale process.
Ideally I would like to begin working on your Short Sale as soon as possible! If you recognize that you are unable to keep up with your payments and will be falling 30+ days behind please contact me immediately. The important thing for you to know and keep in mind is that the sooner I begin working with you on the short sale process, the more you increase your chance of a successful closing. Don’t wait any longer. Act today by submitting the Short Sale Request Form by clicking here!
My Team Members:
In order to provide the BEST possible service to my clients I have on my team professionals to deal with all aspects of the short sale. I work with a local, reputable Law Firm, Law Office of Attorney Timothy Sherman who is available to my clients for their legal needs. If you have your own attorney that you would prefer to work with, just make sure to give me their contact information so that we can work together to offer you the best possible service. I also have an Administrative Assistant. Through myself and my trained, competent team members we will do our best to assist you in this trying situation.
Would you like additional detailed information on the short sale process?
Enter your email address below to receive a comprehensive Short Sale Guide. Use this guide as a reference on what to expect when selling your home using a short sale.
Enter your email address here:
LEGAL AND TAX ADVICE: Seller acknowledges that Broker is not qualified to provide financial, legal, or tax advice regarding a short sale transaction. Therefore, the Seller is advised to obtain professional tax advice and consult independent legal counsel regarding the tax implications and advisability of entering into a short sale agreement.