FREQUENTLY ASKED SHORT SALES QUESTIONS 

A "Short Sale" is relatively new phrase to many homeowners, but this type or sale has been part of the real estate market for many, many years. Most REALTORS® are not up to date with the process and that has cost much confusion in the community with homeowners and even REALTORS®. Since I was a Certified Distressed Property Expert," I thought it would be prudent to explain and dispel many misunderstandings. 

What is a Short Sale? 

It's when: 

· A homeowner is authorized to sell for less than what is owed on the mortgage.  

· The lender authorizes or accepts the sales price as a payoff.  

· The seller avoids foreclosure and many times they can also avoid a judgment.  

· The seller avoids a negative report, by the lender, to the credit bureaus.  

The seller won't get any money at closing, but they will avoid the emotional toll a foreclosure can cause. The negotiations include a favorable wording for the forgiven debt on the mortgage that can help the recovery of the homeowner. 

Why would a lender agree to lose money? 

· Financially, it's a smaller loss to accept a short sale than it would be to incur the additional expenses of a foreclosure. 

· Lenders are in the business to lend money not home ownership. The more resources they have tied up on a property the less they have to lend out. 

· With prices dropping so rapidly, even if the lender decides to foreclose they will lose even more money when they finally try to sell the property later rather than sooner. 

How does a short sale help me? 

· It helps you avoid an emotionally draining foreclosure process. 

· Avoiding a foreclosure with help save your credit. Typically a foreclosure will drop your credit score up to 200 points per loan. 

· Avoid having a foreclosure on your credit report anywhere from 7 to 10 years, which affects your future purchasing power and interest rates. 

· It could help you avoid a "deficiency judgment" from the lender after the foreclosure as they try to recuperate their losses.  

But I've already received my foreclosure notice, is it too late for a short sale? 

· The short answer is no, but there are a few variables that can affect the foreclosure timeline. 

· A qualified Real Estate Agent or better yet, a Certified Distresses Property Expert can help you extend the foreclosure timeline up to 6 months and in many circumstances up to 7 or 8 months. 

· A sale of a home can be done and approved up to the day of the bank sale or auction of the home. 

I haven't missed any mortgage payments; can I still do a show? 

· Typically the lender will not consider a short sale if there have not been any missed payments but can be overcome if we can show a compelling reason why the payments have been made but the payments are not sustainable into the near future. 

-- We would need to show if the payments were made with your credit cards, by borrowing from family members or even if the money came from retirement accounts, as an example. This will not guarantee the lender will accept but there are instances where they have done so. 

How do I pay the REALTORS® commissions, taxes and other expenses associated with a home sale? 

· The homeowner does not pay any of the expenses associated with the sale of the home, such as commissions and other closing costs. Those expenses are also paid by the lender. 

· In December 2007, President Bush signed into law the Mortgage Forgiveness Debt Relief Act which eliminates the income tax that used to be levied on the forgiven portion of the primary home's sale. The tax is still in force for second homes and investment properties
 

SHORT SALES
The federal government has launched a new website with online tools that will allow a homeowner to determine if they are eligible to participate in the "Making Home Affordable" loan modification and refinancing program.

The site is Making Homes Affordale and shares information about how this program works and who is eligible for assistance. This is the same $75 billion program you may have heard of recently in the media.

The homeowner you are working with should have the following available:

* Information about your first mortgage, such as your monthly mortgage statement.

* Information about any second mortgage or home equity line of credit on the house.

* Account balances and minimum monthly payments due on all of your credit cards.

* Account balances and monthly payments on all your other debts such as student loans and car loans.

* Your most recent income tax return.

* Information about your savings and other assets

* Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources.

* It may also be helpful to have: A letter describing any circumstances that caused your income to be reduced or expenses to be increased (job loss, divorce, illness, etc.) if applicable.