Frequently Asked Questions
1. What is a short sale?
- A short sale is: When a house is not worth the amount needed to pay off the mortgage or lien holders and selling costs. The bank or lien holder agrees to take less than they are owed so that the sale can be complete. They do this to avoid a long drawn out foreclosure saving time and money.
2. Will a short sale hurt my credit as much as foreclosure?
- A short sale will harm credit far less than a foreclosure. Often sellers of short sales are able to purchase another house 2 years after the short sale. In addition, with a foreclosure the foreclosed party is responsible for the deficiency (the difference between what the house sells for at auction plus foreclosure expenses and what is owed on it)
3. I have a pending foreclosure date soon. Can I still do a short sale?
- Yes. Even if the sale date is today you have alternatives to foreclosure, which will allow you time consider your options and keep you in your home.
4 .I have already tried to short sale and was unsuccessful. Can I try again and why would I be successful this time?
- Agents who do not specialize in short sales do not know the nuances of getting a short sale completed. Your previous agent may have been a great agent but that does not make them a great short sale agent. The industry average for completing short sales is less than 1 in 4. Our average is over %90. In addition the market is on the rise. What may have been an unattainable minimum amount your bank would take six months ago may be doable today.
5. How long will a short sale take?
- We have completed short sales in as little as 70 days from listing date to closing date. In circumstances where the seller has no money and no place to move to we have been able to slow them down and stop foreclosure for over a year allowing the sellers to save money and stabilize their financial situation prior to closing.
6. How much will it cost me to do a short sale?
- Typically it will cost you nothing out of pocket to sell the property. We do not expect you to pay us anything out of pocket. The 1st mortgage or lien holder will allow proceeds from the sale to pay the usual closing costs and broker fees as well as any legal fees. Some lenders will even pay outstanding municipal electric and water bills. Many of our clients have even been paid a "relocation expense" by their lender meaning you may actually get paid to short sale.
7. Can I do a short sale if I have not missed a payment but my house is not worth what I owe?
- Yes. Lien holders will evaluate the property to determine the value. If the property is not worth what is owed they will consider a short sale.
8. Why not just let it go to foreclosure?
- Foreclosure is FAR worse for your credit. In addition, you may be responsible for any deficiency. The deficiency is the difference from what you owe including outstanding payments, and what the bank nets from a foreclosure sale minus the cost to foreclose. Foreclosure is expensive. The bank usually gets far less from a foreclosure sale, after all the legal expenses, than they would from a short sale. This deficiency can stay with you for years after the foreclosure. Lien holder can go after other assets you have to satisfy it. In the case of a short sale banks usually grant “global relief” in addition to the lien release. This means you would be free and clear.
9. I own another home. What will happen if I allow one of the homes to go to foreclosure or short sale it.
- If you allow a home to go to foreclosure and you own another one, the lien holder from the foreclosed home may pursue equity in the other home to satisfy the deficiency balance on the foreclosed home.
10. What are the tax implications of a short sale?
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.
11. I have more than one mortgage/ lien. Can I still short sale?
- Yes. We have successfully negotiated many short sales with multiple liens including: IRS, Mass Department of revenue and dozens of different banks holding second mortgages including: Bank of America, Wells Fargo, Chase, Citi, Seterus, Ocwen, Nationstar and many others.
12. I have attempted to sell my house by a conventional sale but there was not enough funds to cover the selling costs and the mortgage what can be done?
- If you are not able to stay in the house or cannot make your payments I would suggest a short sale in that particular circumstance.
13. Can I receive any funds from the sale of the property?
- Lien holders generally do not allow the seller to receive any funds from the sale, however in some cases the lien holder or bank may allow for “relocation expense” with owner occupied properties. The seller may also gain some financial benefit from the outstanding municipal bills being paid. More information on relocation expense can be found at: http://www.makinghomeaffordable.gov/hafa.html
IMPORTANT DISCLOSURE: Short sales in Massachusetts, Atlantic Coast Homes and Coleman Real Estate and Law is not associated with the government and our service is not specifically approved or associated with the government or your lender. We are an independant agency. Even if you accept this offer and use our service, this does not guarentee your lender may or may not agree to short sale your property.
Copyright 2015 Mike Becker
