There is a common misconception that in order to qualify for a short sale you can’t have any assets or savings. This is not normally true; in fact, in many cases banks are disregarding retirement accounts that would otherwise be protected in a bankruptcy. Don’t assume that you will have to withdraw funds from these accounts to qualify.
No. This is why it is crutial to work with a professional that has extensive experience at getting Short Sales approved. From the presentation of the Short Sale package to the lender to working with the lenders Loss Mitigations Department, we know how to keep the file moving towards approval. The first step is to get pre-qualified for a Short Sale.
Yes. We can work with both lenders (many times the same lender holds the
1st and the 2nd loans) to put together a Short Sale transaction. Even if
the value of your home is below the balance of the 1st mortgage, we can
normally get the two lenders to cooperate.
In the end, neither lender wants to own another home through foreclosure.
Mortgage lenders are increasingly willing to work with borrowers faced
with a financial hardship to accept a discounted payoff on a mortgage. If
you are faced with a hardship that makes it likely you will be unable to
meet your obligation on your mortgage, your lender would prefer to settle
the matter with you as opposed to taking the property through foreclosure.
As you consider the option of pursuing a Short Sale, remember your lender
is looking to limit any potential loss on your loan. By completing a Short
Sale, your lender has arrived at a solution that is, for them, much better
than a foreclosure.
Bottom line, your lender wants to work with you.
Nothing. It’s true, in most cases you will pay literally no sales costs
if your lender approves the Short Sale. All commissions, title and escrow
fees, and even most repair expenses are paid by the lender as part of the
Short Sale approval. We will include the following clause in the contract.
"Seller’s agreement to sell is subject to approval by existing lender
of a Short Sale at no cost to Seller. Seller shall not be required to deposit
funds to close on the sale of this property."
Remember, lenders approve Short Sales and accept the resulting loss in an
effort to avoid bigger losses through foreclosure.
Yes. Until recently, lenders would not accept the short sale file until the loan was delinquent but now they do as long as you meet the short sale qualifications.
There is no standard short sale process used by most lenders so each lender has their own method and timeline to process a short sale. After the lender receives a complete short sale packet with an offer to purchase the home, the lender will require from 30 to 120 days to process the short sale. The sale must close within 30 days from the date the lenders issue the approval letter.
This seems to be THE NUMBER ONE question I get. Unfortunately there are several answers and which is correct for you depends on the Circumstances.
David's Policy is to never "advise" a borrower client to pay or not to pay their mortgage. Paying or not paying has a lot of collateral effects and the borrower needs to know what they are before making the decision. We don't make the decision for the borrower (our client) because the effects of paying or not paying will affect the client, so it is the client that must make the final decision.
On a primary residence, the seller will receive a 1099C (C = Cancellation of Debt) but Congress passed a law in December 2007 that will absolve that 1099C amount (up to 2 Million Dollars) on the short sale seller of a primary residence. The seller does not have to pay income taxes on the difference between the acquisition costs of the home and the short sale amount...
Be aware that on refinanced mortgages where the seller took equity out of the home. They seller is responsible to pay taxes on the amount that he/she took out if it was not put back into the home on repairs/remodeling.
On investment properties the law mentioned above does not apply and the seller will be issued a 1099C and will have to pay ordinary income tax based on his/her tax rate on the difference between the loan amount and what the home sold for.
There is something called "insolvency", IRS form 982, that might help offset some of the "gains".
I always recommend that my sellers consult with a CPA or a Tax Attorney to examine their particular situation.
You may be able to keep your home. You need to convince your mortgage company
of two things:
The problem that caused the mortgage payment disruption was beyond your
control – illness, injury, temporary disability or forced job change are
a few examples.
You are now solidly in a position to stay current on your mortgage payments
and make some progress towards making up the delinquent amount.
You will need to get lender approval on a Forbearance or Loan Modification
Agreement
A Forbearance Agreement is a written agreement with your mortgage company
in which you arrange to keep your home. The agreement will normally include
two primary elements:
The borrower’s promise to remain current on the mortgage going forward
Some plan for making up the delinquent interest and other charges. It may
mean making additional payments to the mortgage company or the delinquent
amount could be added to the loan to be paid later.
David Simpson
Certified Distressed Property Expert, CDPE
RE/MAX Associates
4285 N. Shiloh Drive, Suite 205 - Fayetteville AR 72703
Cell: (479) 200-9914
Office: (479) 684-5757
Fax: (479) 684-5755
www.shortsalenorthwestarkansas.com
www.nwarkansashomesforsale.com
David Simpson with RE/MAX Associates in Fayetteville Arkansas is one of the few agents with the Certified Distressed Property Expert® (CDPE®) designation in Northwest Arkansas. He has helped many homeowners avoid foreclosure by selling their homes through a short sale. He has homes listed all over Northwest Arkansas including the Fayetteville, Springdale, Rogers, Bentonville and Bella Vista areas.
This site, David Simpson or RE/MAX Associates, LLC is not providing legal or tax advice. The information provided is for educational and informational purposes only. It is recommended that sellers considering a short sale should consult an independent legal and tax advisor for more information.