I can’t make my house payments but I do have an ability to pay back all or part of the
negative equity. Also, I want to preserve my credit score…is a short sale right for me?
Probably, not. In cases where the seller can pay back all or part of the negative equity
(usually to the 2nd lien holder) it makes sense for them to work out a repayment plan. The
lender will then release the lien and allow the home to close.
If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency
The mortgage insurance is not there for your protection, just the mortgage lender’s.
Do I have to have my home ‘Approved’ by the lender prior to offering it for sale as a short
No. Technically speaking there is no such thing as being ‘Short Sale Approved’. The actual
approval only happens with an accepted offer.
I just missed a payment and I know I will miss more….how long does the foreclosure
process take and is there time to do a short sale?
The foreclosure process takes differing times depending on your state. In the Midwest a
foreclosure can take over a year. In California its taking 6+ months. Generally speaking a
well priced short sale being processed by an educated short sale listing agent will sell and
close in less than 120 days.
Will I still have to pay property taxes if I do a short sale?
Property taxes will always have to be paid as part of any accepted short sale. Whether it’s
you or the lender depends on their policies and the specific agreement you reach while
negotiating the short sale.
I owe more than my home is worth and I can’t make the payment, do I have to somehow
qualify for a short sale?
The simple answer is NO. If someone can’t make their payment and they are otherwise
insolvent they qualify for a short sale. Note: insolvent simply means their total debts are
great than their assets.
Do I have to pay income taxes..I have heard that I will get a 1099. Will the loss the bank
takes be treated as a taxable gain to me..the seller..is this true?
It WAS true, now it’s now. Consult your Tax Attorney or Qualified CPA. Very recently the
tax law was modified and now most people who do a short sale will have no taxes due.
How do you, my listing agent get paid..who pays you commission?
The bank will pay the commission along with all the other usual closing costs.
Do I have to miss a payment to do a Short Sale?
No. Late last year most major lenders started accepting short sale offers from sellers who
have never missed a payment.
I want to do a short sale and have a 2nd mortgage, does this make me ineligible?
No. Both of your lenders will need to be satisfied in some way to complete the short sale. If
your first lender will be paid off by the sale, then you just negotiate the terms with the
second lender. Most short sales do involve 1st and 2nd lien holder.
The advantages for a buyer purchasing a short sale is similar to those of purchasing a REO
or bank-owned property. One subtle variation though is that you are dealing with the
present homeowner and have access to historical information about the home that you
would not otherwise by buying a forclosure. I think that there is a lot of mis-information and
distorted perceptions about short sales. A successful short sale transaction depends in
large part on the experience of the listing agent, their ability to assemble a detailed &
complete short sale proposal containing all of the requisite documents needed to meet or
exceed the bank/lender's requirements, as well as timely submit and negotiate such
proposal (this step requires the agent to have excellent communication & persistent follow-
up skills). Short sales can truly be a win-win for all parties involved.
Whether buying a short sale or REO property, you, as a consumer and home buyer, are
likely shopping for the best value and a good deal. Buyers tend to become emotional or
emotionally attached to the outcome of a negotiation since they are likely going to live in
the home. Keep in mind that banks are in the business of loaning money and not owning
real property. For them, the process is purely business and about the bottom line. They
have a good handle on their average costs to foreclose, market & re-sell a home. Their
decisions are typically made without emotion.
As someone who specializes in short sale & REO transactions, I will tell you that my
experiences suggest that each bank/lender is different. An amount that one would jump at,
another will turn their nose up to. In my humble opinion, I believe that most banks/lenders
will negotiate (within reason). They may reject your initial offer but they will usually present
you with a counter-offer if you are in the ballpark. If the listing is being handled correctly,
chances are that the list price of the home is already set at 10-20% below present market
value (and a good deal for most home buyers). Can you expect to come in at 50% off an
already below market list price and win? Probably not. Food for thought...
Top 10 Seller Short Sale Questions..Answered
Most Common Questions A Seller needs to know