Q: What is Short Sale?
A: A short sale is a sale of real estate in which home owner sells their home less than what they owe on their loan and the the lender accepts that amount as payment in full. A short sale is often used as an alternative to foreclosure. A short sale will most certainly result in a negative credit report against the property owner, but the damage is smaller than it is if the home is foreclosed. Home owners can not benefit from short sale, another word, they can not get any money from the sale.
Q: Why do banks approve short sale? wouldn’t it easier and better for them just foreclose the homes that are in default?
A: It is financially beneficial for the bank to approve a Short Sale over foreclosure. It is expensive for lenders to close on a home, some expenses include legal fee, taxes, eviction cost, some insurance and of course selling cost. On average, it could cost over $50,000 per foreclosed home. that property become REO shows up as liability on banks’ balance sheet, their business is loaning, not owning, so banks are motivated to approve Short Sale. Foreclosure is their last resort.
Q: My mortgage is under water, I am not in default, can I do a Short Sale to get out my mortgage?
A: A Short Sale is not for everyone, home owners must meet the following 4 criterion to qualify for a Short Sale:
1 market price of the home must be lower than that the loan amount owed to bank or banks;
2. homeowners must be financially insolvent;
3. home owners must demonstrate true and verifiable hardship;
4. home owners must be cooperative.
Q: I am concerned that if I go through a Short Sale, I maybe liable for the deficiency, what about taxes, do I own more taxes?
A: REALTOR can not give this type advices. It is important that home owners consult a real estate attorney and CPA before considering a short sale. You will get better understanding on what kind impact on your credit, your debt, you taxes and what will happen with the deficiency after a Short Sale. REALTOR will do his or her job to list the property and get it into contract, get approval from the bank or banks. However if it is done right, real estate agent will negotiate with the bank, and have the bank accept a loss on the loan and release the property from the mortgage or deed of trust.
Q: I am ready for a short sale, what will REALTOR do for me?
A: Performing a short sale should be the last action before letting a property fall into foreclosure. You should have already explored other options such as loan modifications. Once it is clear that other options will not work for you, I will help you with a short sale. Please take action ASAP so that you will be left with enough time to complete a short sale prior to foreclosure.
Q: How much time do I have to get a Short Sale approved before bank foreclose my home?
A: It depends on the individual banks, it normally takes at least three months for the bank to review or approve a short sale, but I have seen 6 months short sale or even longer. We as REALTOR can not control how quickly they review or approve, but we always do our best to contact banks to prove.
The more time we have as real estate agents, to conduct a short sale, the better chance you have, just make certain you have exhausted other options prior to attempting the short sale.
Q: What will REALTOR need from me in order to do a Short Sale?
A: Home owners will need to provide documents like bank statements, W2 or paycheck stubs, property tax bills, home owner insurance, home owner association due, bills that you are paying, complete loan information including all banks that involved. Home owner’s hardship letter.
Any liens that home owner has on the property including tax liens, mechanic liens, child support judgments, HOA liens. Avoid unnecessary liens such as inexpensive HOA (home owner association) dues. Keep paying them if possible. The more liens that are filed against a property, the more difficult it is to successfully close a short sale.
If you are filing bankruptcy before or during Short Sale, you are less likely getting approval for a Short Sale.