Foreclosure FAQ

A Short Sale is where you sell the property for less than what is owed. To you, this means that you have sold the home and it is NOT a foreclosure on your record and this is ALWAYS the most desirable outcome. To the lender, it is the same as a foreclosure where they recoup market value out of the property and can treat it the same as a foreclosure but they are able to dispose of the property significantly quicker and at a far reduced cost because they do not have to wait and they do not have the legal fees associated with a foreclosure. You need to remember that a Short Sale has far less negative impact on your credit than a foreclosure or a bankruptcy.

Every bank has a specific method of deciding how much they’ll accept on a short sale. Typically, price is determined by the offer amount compared to the current market value of the property.

Short sale has become the best tool to use to get out of a negative equity situation with the least damage to your credit. Lenders used to make this method more difficult meaning that homes had to go through the foreclosure process before property ownership could be transferred. Lenders have come to realize recently that short sale benefits them far more than sending a homeowner in distress through the foreclosure ringer. No longer do homeowners have to be behind to take advantage of the short sale. You can even short sale your home while going through the modification process.

First and foremost, a short sale relieves the stress of being in foreclosure and it allows the homeowner to get rid of their big mortgage payment and move on with their lives. A short sale allows you to stop the foreclosure process and get a fresh start. On the credit side, a short sale is clearly the lesser of two evils. Late payments are damaging to your credit, but they are nothing compared to having a foreclosure on your record. We work with credit experts to help you rapidly regain control of your life. A completed foreclosure or bankruptcy is difficult to recover from and will stay on your credit for at least 7-10 years.

Yes, but remember the “hardship” element must be present. For investors there may also be some income tax issues resulting from mortgage relief but these consequences are usually far less disastrous than foreclosure. Remember to consult your tax advisor.

In some instances there is a potential risk of a deficiency judgment or a lawsuit on a loan contract, as opposed to judicial foreclosure. Give us a call and we can discuss the specifics of your situation.

Absolutely and do not wait. You do not want a foreclosure on your record. There are some rare instances where a foreclosure may prove a better route but these are very uncommon and we are happy to help you determine the right path for you.

Short sales can still generally be accomplished on all of these types of mortgages, though each one has different criteria.

There are several options available in a distress sale situation. Loan modification is the only option that allows a homeowner to stay in the home but the problem with these is that lenders are not reducing the principal amounts owed on the property. This is a Band-Aid at best and does not help the families who really need help. The other realistic option to short sale is to let the home go to foreclosure. This is a poor option in that you lose the home to the lender and do extensive damage to your credit. With few exceptions, short sale is the best alternative.

Basically speaking, financial hardship is the reason you are behind or in danger of being behind on your payments. The lender wants to know why you are having difficulty paying the obligation that you entered.

Just as in a normal home sale, the property taxes are the responsibility of the homeowner until the date the sale is closed. Then they become the responsibility of the buyer. If your property taxes have not been paid this will affect the negotiations between the buyer and the bank, so you need to inform us if there are any taxes due or liens on your property so we can make sure they are included in the negotiation process of the short sale.

We handle residential properties including 1 to 4 unit dwellings as well as all types of commercial properties.

Yes, you can and it is relatively common. Some lenders even require that a house be listed for sale before approving a short sale in order to show that a discount is necessary.

Sellers often have an emotional attachment to their home and may feel a short sale offer is too low. It is important to remember a few things. First, the seller in a short sale can never receive any money in the transaction. It should therefore be of little concern what price is offered as long as the short sale is done. The only real exception is when the seller has tax liability concerns. (If there is tax liability, a lower sale price means a larger mortgage relief and a greater tax liability.) Otherwise, the price should not matter to the seller.

The commissions are paid from the funds the buyer places in escrow and because there is no equity in the house, the lender ultimately is the one paying the entire sales commission.

A short sale usually takes about 60 to 90 days to complete in the current market. This is very important. The process is complicated and takes a lot of time. So to exercise the short sale option, you must act quickly. If you wait until one week before eviction, no one can help you with a short sale. It is simply impossible. DO NOT WAIT.

The Borrower’s Authorization gives the lender permission to speak to your representative about your loan. That’s all it does, but it is necessary. An authorization must be filled out for each mortgage and for each Realtor or escrow officer authorized to act on your behalf.

Possibly, but it’s not that simple. There are a number of factors involved. For example, are you an investor or is the property your primary residence? Is the debt on the property “purchase money” or has the home been refinanced. If you’re an investor or if the property was refinanced are you insolvent? You can see how the matter can become complex in very short order. You must consult with an attorney or CPA on this issue. However, without getting too complicated, I can provide our experience with this problem.
When a lender writes off part of a loan (discounts it) the portion written off is the equivalent of a cash infusion to the owner. This ” mortgage relief” is then reported as income to you by means of a 1099C form.
Even if you receive a 1099C and declare it as income, there is a good chance you will owe very little tax. This is because there is an IRS rule regarding “insolvency” which essentially says if you are insolvent (more liabilities than assets) at the time of the short sale, you don’t have to count the 1099C as income (instead you declare it, then obtain the exemption). There is an IRS form to complete to show you are insolvent. See the Internal Revenue Service website at In December of 2007, President Bush signed a new law into effect providing that for a specified period of time homeowners who satisfy certain requirements will not be taxed on mortgage relief. This bill is called the “Homeowners Debt Forgiveness Act” and it may or may not apply to your situation.
Again, please consult a CPA or tax advisor.

Yes, this is happening with much greater regularity. Sometimes these are the most attractive short sales for both the buyer and the lender because the buyer can take advantage of the lender’s ability to avoid the vast majority of the costs of foreclosure. In these cases, it is more important to have a very clear “hardship” story to explain to the lender why you are unable to make the payments.

Yes, though it can make the process more difficult because the price must be lower to compensate for the repairs. The key is to show the bank’s appraiser all the work that needs to be done. Let us know in advance if this is the case with your home.

Depending on where your home is located and the current market conditions in your area, 10% equity may or may not be enough to offset market conditions. Call us for a free consultation.

No. All parties listed on the deed or mortgage must sign the short sale purchase agreement. There are no exceptions to this.

Yes, but it gets much more complicated and will take longer. If this is the case with your home, be sure to COMPLETELY list all liens you have. Each lien holder must be negotiated with individually. A short sale in this circumstance will take longer.

Yes. You can do a short sale on an inherited property as long as you have clear title.

Yes, each mortgage or line of credit (HELOC) can be negotiated individually. It is important to know which mortgage filed the foreclosure or, if more than one are in foreclosure, which one filed first.