What is a short sale?

A short sale is the sale of real estate in which proceeds from the sale are less than the amount owed to the bank. During the Short Sale process we will seek approval from the mortgage provider to release the home owners from their obligations to repay the debt. This is something we will negotiate for you. Short sales are one of the most common forms of loss mitigation for home owners who are no longer able to make their mortgage payments and do not qualify for other alternatives.



 
Short Sale Process
  1. Have a private and confidential consultation with LaTanya Rowe
  2. Review short sale required documents
  3. List and Market your home.  A well priced home should go under contract within 30 days.
  4. Obtain a qualified buyer.
  5. Submit offer and short sale package to lender
  6. Negotiate with Lender the terms and conditions of the short sale approval
  7. Obtain Short Sale approval letter
  8. Go to Settlement
  9. Move on with your life.
     The Entire process can take anywhere from 120 to 150 days on average.




Tax Consequences
  • Can the Lender Pursue Judgements Against me for the Deficiency Amount?
They can if they choose. In general, a short sale does not automatically release you from the remainder of the debt owed to your lender.  It depends on how their final approval letter is written. This can be negotiated in the final stages of the short sale once a negotiator has been assigned to your case.  All terms and conditions of the short sale will be outlined by the lender in writing and presented to you.  You still have the choice to accept or deny their terms and opt for the foreclosure or deed in lieu of foreclosure should you decide. The debt can be sold to a collector if the debt is not written as settled.
 
  • Will I have to pay taxes?
When the lender sells a property for less than what was owed, a deficiency exists with the loan.  The deficiency is the difference between the amount the homeowner owed and the net proceeds gained by the lender from the sale.  Because of this, we negotiate with the lender not to seek a deficiency judgement against you.  When the lender choses to waive the deficiency judgement, they report the loss to the IRS.  Due to the extension of the Mortgage Debt Relief Act until December 31, 2013, the IRS can not tax you on the deficiency amount if the property is your primary residence. 

At least the mortgage debt relief provision is still active! However, this provision may have a limited shelf life, so if you are considering taking advantage of this provision, do your analysis and make your move early as soon as possible.  If you act NOW, at least there is a chance that we can facilitate a favorable outcome for you.

  • Should I Consider Renting Out My House?
There are many home owners whose mortgages are higher than the value of their house and are stuck between a rock and a hard place.  They may want to move for retirment purposes, for hardship reasons, divorce, etc... They consider becoming landlords and renting out their primary residence.  Many of them wish they had done a short sale or a strategic foreclosure because now they are stuck with negative cash flow and no possible debt forgiveness because now the home is a rental.  The Mortgage Debt Relief Act refers to primary residences and is extended only through this year.

 

Do I Qualify?

Are you unable to continue making your mortgage payments? If yes, then you probably qualify. Just about anyone who can demonstrate a financial hardship may be eligible.

Here are some common hardships: 
 

 

  • Death in the family
  • Divorce, separation or marital difficulties 
  • Incarceration
  • Increased expenses and excessive debt
  • Increased bills from illness or medical emergency 
  • Job transfer
  • Loss or Reduction of income
  • Military service
  • Unemployment
  • Unexpected repairs and home maintenance
  • Unfavorable mortgage terms (like adjustable rates or balloons)


No Out of Pocket Expenses
  • Who Pays the Realtor for their Services?

Great News! The bank pays all commissions plus items the buyer might ask for (such as closing costs). They pay all the fees associated with selling your home.

  • Will the lender ask me to contribute money?

    Each short sale case is unique and depends on many things such as the amount and type of assets, the amount of the bank's loss and the number of loans. More often than not, we are able to obtain a short sale approval without seller contribution. If the lender requests seller contribution, you can decide at that time wheter to accept or deny the terms of the short sale. The savings you have in retirement accounts is protected. However, the savings in non-retirement accounts is fair game for lenders.



Effect on Credit Scores
What is the Impact on Your Future....
 

Your credit score (credit rating) is known as your FICO (Fair Isaac Corporation) score. The FICO® Score is a number that summarizes your credit risk. Lenders use it to make credit decisions, such as the interest rate you get when you apply for a loan. Your score can range from 300 to 850.

  • Short Sales may not be any better than foreclosure as far as your Credit Score is concerned.  

The truth is, decision makers in the lending industry know that a short sale is no different than a foreclosure or deed-in-lieu on your credit report. No matter how high the credit score a Bankruptcy, Foreclosure, Deed-in-Lieu, Short Sale, Judgements, Collections, Charge-offs and Tax liens are subject to individual evaluations. They are all noted as "not paid as agreed" on your credit report and are considered the same by your credit score.

  • Bankruptcy

 If you are considering bankruptcy as an alternative to foreclosure, that may have a greater impact to your credit score. While a foreclosure is a single account that you default on, declaring bankruptcy has the opportunity to affect multiple accounts and therefore has potential to have greater negative impact on your credit score.
 

  • Paying Bills During the Short Sale Process  
In the course of getting your short sale approved, you might miss your mortgage payments, and this will reflect on your credit score. By avoiding foreclosure you will likely be able to resume normal borrowing (car loans, credit cards, consumer goods, and such) relatively quickly. Your credit will recover much quicker from the credit dings of a few late mortgage payments, if you keep your other accounts current.
 
  • Renting after a Short Sale 

Most landlords are a little more lenient, due to the nationwide credit meltdown, when they see a derogatory mortgage item on your credit report. As long as you can explain to the landlord that you did a Short Sale recently and can show that you maintained all your other bills on time they might be willing to rent to you.


You can find much more information about credit scores at www.myFico.com
 

Government Programs
  • Fannie Mae’s program is called Short Sale/HAFA II.

  • Freddie Mac has a Streamlined Short Sale.      
Freddie Mac Short Sale Info


Both government entities have revamped their Short Sale process allowing for a little more leniency on home owner Short Sale eligibility as well as allowing up to $3000 relocation allowances.  Visit the websites listed and/or schedule an appointment with LaTanya Rowe, your Virginia, Maryland and Washington DC Short Sale Specialist.
 

 
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