Short Sale FAQ

Do I qualify for a Short Sale?

A good Short Sale candidate is a homeowner who is experiencing a financial hardship that is causing them to fall behind on their mortgage payment(s) and is unable to keep up with all of their monthly obligations. Some reasons for falling behind on your mortgage payment(s) may include sudden change in monthly household income, loss of employment, adjusting mortgage payments, divorce, sudden medical obligations, and more.  Financial hardship will be an important part of the bank's review process.  In addition there is no equity in the home to pay off all the outstanding loans and closing costs associated with the sale of the home.

What if I don't have the money to pay the Realtor commissions?

In a Short Sale transaction you, as the seller do not have to pay the Realtor commissions or any of the closing costs; the bank covers all of these costs. 

How long does it take to do a Short Sale?

Stages of the Short Sale process

Stage 1 - Working with you as the homeowner collecting all of the required documentation that your bank will require us to send them. This stage shouldn't take longer than a couple of days.

Stage 2 - 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.

Stage 3 - Aggressively marketing your home for sale and producing a qualified buyer for your home. This stage can vary from a few weeks to as long as a few months.

Stage 4 – The actual presentation of the offer to your bank. This is where our proven system in providing a complete Short Sale package that the Loss Mitigation department is willing to review. This is where many files get dropped. A complete package makes it easy for the lender representative and increases the possibility that it will get reviewed and sent “up the line” for a decision. Negotiation and approval can take as little as 2 weeks or as much as 3 months. On average most Short Sales take between 30-60 days from the date the offer is presented to the lender to the date of the Short Sale approval.

Stage 5 - The fifth and last stage to the Short Sale process is the period of time between the Short Sale Approval from the bank and the buyer closing on the home. This usually will take 3 weeks to 30 days.

Are there any tax ramifications to a Short Sale?

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 is true, but it is also true on a Foreclosure.

If you do a Short Sale you will receive a 1099 from your bank. This 1099 is called a "1099-C." 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 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, however you must first consult your CPA or Tax Preparer on your personal tax ramifications on a Short Sale or Foreclosure.

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). 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?

Once you go 30+ days behind on your mortgage payment, your bank has the right to report to all of the credit bureaus 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, 90+ days late payments reported to the credit bureaus that will affect their credit score.

When the actual Short Sale is completed, most banks will report to the credit bureaus that your account was "paid in full for less than the full amount". It is important to keep in mind that each lender has a different way of reporting that a Short Sale was done. If your home were to go to Foreclosure you would most often see the bank report "Foreclosure" on your credit report.

Although neither a Short Sale nor Foreclosure will have a favorable impact on your credit it is most certain that a Foreclosure is much worse.

Why would a bank agree to a Short Sale?

While banks will take a loss with a Short Sale, they will take a larger loss with a Foreclosure. It is much more cost effective for a bank to accept a Short Sale rather than Foreclose on a home. There are many additional costs in maintaining and selling a bank owned property as well as they generally receive a lower sales price than the negotiated Short Sale. Banks are not interested in holding on to non-performing assets.

When should we begin the Short Sale process?

The moment you recognize that you are unable to keep up with your payments and will be falling 30+ days behind. It is important to know that the sooner we 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!