A short sale is a unique transaction that allows a homeowner to sell their property for less than they owe on it to avoid a Foreclosure Sale.
A short sale requires a trained professional who has experience negotiating with your bank(s). You may have 1, 2 or even 3 different loans on your home. Being a CERTIFIED Short Sale Expert, I can negotiate with the banks so they will Release your mortgage liens and allow you to close escrow.
My team has the experience that convinces lenders that they will net more money if they take less than what is owed NOW, rather than taking the property back through foreclosure and trying to sell it later. Not all lenders will accept short sales or discounted payoffs, if it would make more financial sense for the to foreclose.
Example of a Short Sale:
A homeowner has an unpaid home loan balance of $600,000. We will complete the short sale package with you. Once an offer is received, we negotiate with the lender on your behalf. We get the lender to agree to accept an offer of $500,000 as payment in full. The home is sold to the new buyer and the your credit shows loan paid in full. You may also have a 2nd or 3rd loan on the home as well. We negotiate with secondary banks and convince them to take a small payoff, since if the home were to go into foreclosure they would get nothing at all.
What is a Certified Short Sale Specialist?
A Short Sale transaction is very different from just a normal sale. It is imperative to hire an agent who is specially trained to handle this type of transaction. I have gone through 6 months of specialized training through Harris Real Estate University and am constantly being updated with new bank procedures, government bills, regulations and laws.
Who Pays Our Commission?
We negotiate directly with the bank for our fee. Usually the bank pays about 1% Less than usual for the marketing and negotiation responsibilities associated with the transaction. This is why most other real estate agents don’t want to take the time necessary to become experts in short sale transaction. It requires quadruple the work at lower pay than they’re used to. I am in this business to deliver the best service to you. This is a difficult time for homeowners and I am here to help you get through it.
How Long Will it Take?
The short sale negotiation process can take between 60-120 days before a lender and homeowner can agree on acceptable terms. It is a lengthy process of bureaucracy, insurers and investors that we will have to maneuver through in order to get your short sale approved. We understand how painful your original situation may be, so we make a special point to communicate with our sellers on a regular basis as we go through this grueling process.
My Home Is Already In Foreclosure, Can We Close The Short Sale In Time?
Just starting the short sale process will not automatically stop the lender from initiating the foreclosure process. However, we have successfully convinced lenders to postpone a foreclosure and any auction dates that may already be set, while we negotiate a short sale. While there are no guarantees, we will do everything that we can to get your home sold before the lender follows through with their foreclosure. We have already been successful in getting auction dates postponed as far back as 90 days to successfully close the short sale.
Can I Stay in the House or Do I Need To Move Out Now?
Technically speaking, you are still the owner of record until the home closes escrow. If for financial reasons you are unable to move out right away, just make sure you can make your home easily accessible for potential buyers to see it. By successfully closing a short sale, your credit report will say that your debt was settled, which will help you to get into another home at a lower monthly payment. We work with a great team of property managers who can help you locate a rental home..
Will I Get Any Money From the Sale?
No. The lender is taking a loss on the property and they will have you sign documentation accepting that you will earn $0. It is better for the bank to work out a short sale with you as it will cost them more money to take the property back and resell it as a foreclosure.
I Heard That I Will Get a 1099 At The End Of The Year – Is This True?
If you purchased the home as your primary residence, No. On December 20th, 2007, “The Mortgage Forgiveness Debt Relief Act of 2007” was passed into Law. This allows homeowners a 3 year window to avoid paying taxes on the loss the lender takes. Before this act took affect, “If the value of your house declined, and your bank or lender forgave a portion of your mortgage, the tax code treated the amount forgiven as income that can be taxed.” According to “The Mortgage Forgiveness Debt Relief Act of 2007” if you sell your home as a short sale by December 20th, 2010, the loss the lender takes will not be considered taxable income by the IRS.
If you purchased the home as an investment property, you will receive a 1099 at the end of the year for the negative amount. If the lender forecloses on your home, they will still send you a 1099. So, in either a short sale or a foreclosure on investment properties, the bank will still send out a 1099 for the difference. Please speak to your accountant for details. The amount you are liable for will depend on your tax bracket. The IRS is allowing people a payment plan option.
What type of paperwork do I need?
The lender will require a view of the financial package that usually includes:
(2) Months’ bank statements
(2) Months’ pay stubs
(2) Years’ IRS tax returns
How Will A Short Sale Affect My Credit?
One of the most IMPORTANT benefits about doing a Short Sale, is that it will not hurt your credit as bad as letting the home go to foreclosure. After completing a short sale you WILL be able to purchase a home again at a favorable rate in 1.8-2yrs. Your credit report (FICO score) will drop approx. 100-150 points and will show as “Debt Settled”
If you let your home go into foreclosure, your credit report will show that you had a Foreclosure. Your points will drop as much as 250 points. You will not be able to buy another home for 5 (FIVE) years.
If you file bankruptcy you will not be able to buy a home again for 7(SEVEN) years.
Is There a Light At the End Of Tunnel?
YES. This is not the bottom for you, things will turn around. For the majority of homeowners this market downturn was unexpected. Many thought that their ARM loans could easily be refinanced and that real estate prices in general wouldn’t have gone down as much as they did.
With my seller’s After Care Program, I can assist in putting you into position to take advantage of this down market and Buy Again! My team can help you REMOVE the late payments that are probably on your credit in as little as 6 (SIX MONTHS).
Sincerely,
Emily S. Knell
Main Street Realtors
562-430-3053 – emilyknell1@yahoo.com
