Frequently Asked Questions from Sellers If the questions below don't answer all of your questions, or if you have any additional concerns about the short sales process or what paperwork is required, please feel free to call me or email me anytime. I will be more than happy to answer any of your questions. But please remember, without specific information as to your circumstances, I can only provide general answers - each sale and situation is unique. If you are considering a short sale, this can be an extremely stressful time in your life. I would like to help you in making the process as stress-free as possible. What is a Short Sale? Basically, a short sale is used to describe the sale of a home in which the homeowner owes the bank more than the home is worth. The bank agrees to allow the home to be sold for less than what is owed. Would I qualify for a Short Sale? A short sale candidate is a homeowner who is behind on their mortgage payment and is unable to keep up with all of their monthly obligations. Some of the reasons for falling behind on their mortgage payment may include sudden change in monthly household income, loss of job, divorce, and more. Another candidate is homeowner who is not behind on the payments but is being required to relocate (ie: military personnel). What if I have more than 1 mortgage? Yes, we can work together even if you have more than one mortgage on the home. When should we begin working on the together? As soon as you realize that you will be unable to make your regular mortgage payments, we should be working together. The sooner we begin the better chance we have of successfully completing the short sale. How do I choose the right agent? Before hiring an agent to assist you in a short sale, make sure they are qualified and understand all the work that is required to see you through to the end. An agent who has a good understanding of the short sale process will be able to explain the process and be able to advise you what type of documents you will need to provide to the bank in order to facilitate the short sale. Additionally, a good agent will never try to advise you on the tax consequences or legal ramifications of a short sale. This is best left up to a qualified tax advisor or real estate attorney. How long does the process take? The length of time to complete a short sale varies. It can be as short of a process as 60 days to 5 months. There are several stages that are involved with the Short Sale process... (1) The first stage involves working with the homeowner to get all of the required documentation that your bank will require. Some lenders will accept the paperwork provided by you, the homeowner, but some lenders require their own forms to be filled out. If you are considering a short sale, ask your lender(s) if they have a short sale packet that they will provide to you. If they do not have a packet, your agent will know what paperwork is required by the lenders. (2) The next stage entails properly pricing and marketing your home for sale to produce a buyer. This stage can take as little as a few days or as long as a few months. (3) Once a buyer is secured for your home, the next stage is the submission of the offer to your bank. This is where expertise and experience in negotiating Short Sales takes place. The actual negotiation/approval process can take as little as 2 weeks or as much as 3 months. On average most short sales take between 60-90 days from the date the offer is presented to the lender to the date of the Short Sale approval. (4) Finally, once the lender approves the short sale, the time to closing can taken anywhere from 21-45 days. What if I don’t have money to pay the commissions or closing costs? Realtor commissions and closing costs are not usually paid for by the seller. However, there are costs associated with closing the sale that the lender will not always cover, such as HOA liens or other liens not related to taxes. Unless those costs are covered by the buyer, then you, the seller, will be liable to pay them in order for the sale to successfully close. If you know that there are liens against the property or that the HOA fee hasn't been paid or kept current, please let the agent who is handling your property know as soon as possible. This can alleviate any surprises at the closing for all parties. Are there any other fees associated with a short sale? Unlike some other agents, I do not believe in charging any fees beyond what is normal and customary for a "traditional" transaction. I do not charge a "retainer fee" or a "cancellation fee". This means that I will get paid a commision upon the successful closing of the sale, nothing more. Are there any tax consequences to a Short Sale? Again, the best qualified person to answer this question is a tax advisor or CPA. What occurs if you do a short sale is you will receive a 1099 from your bank. Generally speaking, this is for the amount of money that is being shorted to the bank. Say you owe $250,000 on your home, but short sale the house for $200,000. There is a difference of $50,000 that the lender is not receiving. The IRS generally considers this amount of money to be taxable, even if you did not receive any actually cash. Also, be aware that while there may be no tax consequences on a first or even second mortgage, quite often this does not apply to a Home Equity Line of Credit (HELOC). What about my credit? The best answer to this question at this time is yes, there will be an effect on your credit. Mainly, this is because of the late payments to the mortgage. Once the short sale is completed, most banks will report to your credit report that your account has been “paid in full for less than the full amount" or it may also be marked as "settled" or even "paid as agreed". However, I cannot tell you how much your credit will be affected. If you are concerned about what your FICO score will be after a short sale, please seek the advice of a professional consultant. Why exactly would a bank agree to a Short Sale? It is much more cost effective for a bank to do a Short Sale rather than Foreclose on a home. Banks are not interested in owning real estate. Banks make their money from receiving monthly mortgage payments. While banks will take a loss doing a short sale, it is generally more financially feasible than foreclosing on a property. Once a home goes into foreclosure, there are additional costs to the bank such as attorney fees, etc. Can the bank sue me for the difference? Because Arizona is what most people refer to as a “Non-Judgment Deficiency” state, the answer is generally "no", the lenders cannot usually sue you for the difference between the sale and what was owed. Again, however, a HELOC is not usually a standard 2nd mortgage on the home, but is usually a loan that is tied to you, the homeowner. A lender may require you to sign a note guaranteeing continued payment of that loan. This is where collection attempts such as lawsuits and judgments may apply. If you have a HELOC or have additional questions, please seek the advise of a Real Estate Attorney.
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