SHORT SALES
Frequently Asked Questions
Frequently Asked Questions
Your Subtitle Text
Seller FAQ's
BEFORE you read throught the following, be sure to ask yourself a few important questions:
Do you wish to keep your home?
If the answer is Yes... then it is important that you know your alternatives. You may have options based on your individual circumstances. Read on for possible options!
If the answer is no... then you must know the answers to the following regarding your personal situation:
a) Are your expenses greater (or equal to) your income?
b) Are your liquid assets equal to less than six months of living expenses (not including retirement accts.)?
c) Is the value of your homes less than (or equal to) what you currently owe on the home?
Frequently Asked Questions of Short Selling your home
1. I am underwater and owe more on my home than it is worth. What are my options?
Every individual circumstance is different. Based on your situation you may consider one of the following options:
2. Am I a candidate for a Short Sale?
There are a number of things you must consider, as not every owner is a good candidate for a short sale. Be prepared to discuss the following qualifying items with a trusted Real Estate Professional who, after knowing your personal circumstances, will be able to help you determine if a short sale is in your best interest:
3. What paperwork is required for me to complete to get the short sale going?
Sellers will be required to complete an authorization to give permission to the Real Estate agent/negotiator to speak to your lender so they can discuss your mortgage information with your lender. You will want to get the most exposure for your home by listing it on the Multiple Listing Service, which will require that you hire a licensed real estate agent to list your home. The agent will have broker required paperwork for you to sign to list your home. Your real estate agent will also be your liaison with your lender and provide a multitude of assistance during the short sale process.
In addition, a Short Sale Package will be required to be submitted to your lender which will include a number of documents, such as a seller hardship letter, financial information, repair estimates, value estimates, and an estimate of costs and liens to be paid as a result of the sale, among a number of other documents. Your Real Estate professional will assist you in this gathering process and will help facilitate getting all the documents to your lender(s).
4. What is my first step to start the short sale process?
As the seller/owner, you must initiate contact with your lender(s) first and speak to the appropriate department to advise them of your intentions. The appropriate department may be identified as loss mitigation, work-out, asset recovery, or hope department. The lender representative will then discuss with you how to proceed based on their requirements. Generally, the department responsible for sending the mortgage default notices is not the department to contact to approve a short sale. You also want to contact legal and tax advisors, as well as a trusted and experience Real Estate agent to assist you with the process and discuss listing your home and the steps necessary for a successful sale.
5. Will I have to pay income tax on any any forgiven debt?
There are continually changes to the laws for forgiveness and any seller considering short selling, foreclosure, and/or loan modifications should consult with a tax advisor regarding tax consequences, if any. Read more about the Mortgage Foregiveness Debt Relief Act to determine if you may be a candidate for debt relief pursuant to requirements outlined by act via the Internal Revenue Service.
6. Should I stop making mortgage payments?
It is not always necessary to stop making payments to go through a successful short sale. Your lender will provide you instructions and requirements for qualifying for a short sale, which may require you to be stop making payments, and your legal advisor should consult with you on the consequences of defaulting on your mortgage payments.
7. Who pays for the Real Estate professional's commissions in a short sale?
In a regular non-short sale, commissions are usually paid for by the seller. Because sellers are responsible for the compensation that was agreed in the listing agreement, lenders that approve short sales are not legally responsible for payment of any commission. Your Real Estate professional will be in communication with your lender to discuss and work out an agreement for commission payment and in most cases, commissions are paid to the real estate brokers as negotiated early on when the lender agrees to allow the home to short sell.
8. How long will it take and what happens if the buyer changes their mind?
A Short sale may take from 30 days to 6 months (or more) to obtain lender approval. The value of the home may decline during this period. The purchase contract will most likely include a Short Sale Addendum which will dictate how long a buyer can and should stay in the contract before they can terminate the contract. In Arizona, the standard Short Sale Addendum allows the buyer to cancel the contract any time prior to obtaining lender approval and the buyer, seller and lender(s) must all agree to the final terms or the contract may be terminated by the buyer. If the value of the home drops during the approval period, the buyer may not have incentive to stay committed to the sale and may cancel due to value and the home's inability to appraise at the purchase price. An experienced listing agent will advise you on terms that can be negotiated to keep the buyer in the contract as long as possible, and it is highly recommended you discuss this with your agent so as to prevent cancellations that may extend the process longer, or even extend it to the point that you have no more time and the home thereby undergoes foreclosure proceedings.
9. When is the earnest money due in a short sale?
As with any real estate contract, the earnest money on a short sale is due according to the terms of the written agreement. It is usually deposited upon fully executed contract terms between the seller/owner and buyer. In a short sale, usually earnest money is not deposited prior to lender approval of the sale. This should be a discussion with your listing agent and is a negotiable item of each individual sales contract.
10. When is the home inspection, mortgage application and appraisal completed?
Every contract will vary on this, however, in Arizona, the Short Sale Addendum allows the inspection to begin only after the lender approval. A listing agent may wish to protect the seller and commit the buyer by negotiating that the inspection take place within 10 days of the seller and buyer's executed contract. A buyer may not, however, wish to spend the money to start the loan, inspection and appraisal process until there is a full short sale approval. Consult with your real estate professional on the best way to proceed for your particular sale. No matter what is decided, the buyer must be prepared for the lender approval to come any day, and thus, must complete his/her due diligence and loan within the dates dictated in the short sale approval. If buyer cannot close on time, the seller's lender could cancel the contract, keep the buyer's earnest money and then the buyer and seller both lose.
You will want to read the FAQ's for Buyers on this site to understand the buyer's side of the sale. Knowledge of the entire process will assist you in understanding the steps necessary for a successful sale so you are not taken by surprise at any point during the transaction. Contact us for more information about your options and confidential information about listing your home for sale.
Do you wish to keep your home?
If the answer is Yes... then it is important that you know your alternatives. You may have options based on your individual circumstances. Read on for possible options!
If the answer is no... then you must know the answers to the following regarding your personal situation:
a) Are your expenses greater (or equal to) your income?
b) Are your liquid assets equal to less than six months of living expenses (not including retirement accts.)?
c) Is the value of your homes less than (or equal to) what you currently owe on the home?
Frequently Asked Questions of Short Selling your home
1. I am underwater and owe more on my home than it is worth. What are my options?
Every individual circumstance is different. Based on your situation you may consider one of the following options:
a) Refinance via Making Homes Affordable Refinance Program - Launched in early 2009, this option may be a good one if you meet the criteria. Find out more about the criteria required for this program by going to the the Making Homes Affordable website.
b) Sell and Bring Cash to Closing - By curing deficiencies at closing, homeowners can avoid the credit damage that a short sale or foreclosure can cause. Be sure to consult with a finance and tax professional before bringing liquid assets to closing.
c) Lender Workout - Also known as a Loan Modification, modifications encompass such options as making partial payments (aka forbearance), reinstatement, repayment plan, reducing or rolling back interest rates, extending term/years for your payoff, adjusting adjustable rate mortgage to a fixed rate, or signing over the property to the lender in exchange for debt forgiveness. Find out if your are eligible for a Making Homes Affordable loan modification program by going to their Website.
d) Short Sale - the positives of a short sale include (1) lessening the impact a foreclosure can have on the surrounding community, and (2) won't damage the distressed owner's credit as much as a foreclosure. Read on for more information about the + and - of a short sale.
e) Deed in Lieu of Foreclosure - This occurs when the borrower agrees to trade the property to the lender in exchange for the cancellation of the note. Market conditions and state-specific laws will influence whether and how a lender accepts a deed in lieu of foreclosure. Lenders are less willing to consider this option in declining markets.
f) Foreclosure - If the homeowner is only weeks away from the foreclosure sale, the homeowner may not be able to pursue any of the previous options, including a short sale.
g) Do Nothing or Walk Away - Be sure to consult legal advice. Walking away just because value went down may not be a viable option and will most likely have legal consequences for you.
2. Am I a candidate for a Short Sale?
There are a number of things you must consider, as not every owner is a good candidate for a short sale. Be prepared to discuss the following qualifying items with a trusted Real Estate Professional who, after knowing your personal circumstances, will be able to help you determine if a short sale is in your best interest:
a) Do you have a valid hardship?
b) Is there sufficient time to conduct a short sale?
c) Have you taken the time to consult with the appropriate finance, tax and legal professional? Your Real Estate
professional experienced in short sales will most likely have referrals for you in these areas.
d) What is the amount owed on the property?
e) Are there liens in addition to the mortgage, such as a tax lien or homeowners association liens?
f) What is the condition of the property? Is it livable? Does it need repairs? Cost of repairs?
g) Is owner in a position to cooperate and assist in providing the required documentation to support your need to short
sell?
3. What paperwork is required for me to complete to get the short sale going?
Sellers will be required to complete an authorization to give permission to the Real Estate agent/negotiator to speak to your lender so they can discuss your mortgage information with your lender. You will want to get the most exposure for your home by listing it on the Multiple Listing Service, which will require that you hire a licensed real estate agent to list your home. The agent will have broker required paperwork for you to sign to list your home. Your real estate agent will also be your liaison with your lender and provide a multitude of assistance during the short sale process.
In addition, a Short Sale Package will be required to be submitted to your lender which will include a number of documents, such as a seller hardship letter, financial information, repair estimates, value estimates, and an estimate of costs and liens to be paid as a result of the sale, among a number of other documents. Your Real Estate professional will assist you in this gathering process and will help facilitate getting all the documents to your lender(s).
4. What is my first step to start the short sale process?
As the seller/owner, you must initiate contact with your lender(s) first and speak to the appropriate department to advise them of your intentions. The appropriate department may be identified as loss mitigation, work-out, asset recovery, or hope department. The lender representative will then discuss with you how to proceed based on their requirements. Generally, the department responsible for sending the mortgage default notices is not the department to contact to approve a short sale. You also want to contact legal and tax advisors, as well as a trusted and experience Real Estate agent to assist you with the process and discuss listing your home and the steps necessary for a successful sale.
5. Will I have to pay income tax on any any forgiven debt?
There are continually changes to the laws for forgiveness and any seller considering short selling, foreclosure, and/or loan modifications should consult with a tax advisor regarding tax consequences, if any. Read more about the Mortgage Foregiveness Debt Relief Act to determine if you may be a candidate for debt relief pursuant to requirements outlined by act via the Internal Revenue Service.
6. Should I stop making mortgage payments?
It is not always necessary to stop making payments to go through a successful short sale. Your lender will provide you instructions and requirements for qualifying for a short sale, which may require you to be stop making payments, and your legal advisor should consult with you on the consequences of defaulting on your mortgage payments.
7. Who pays for the Real Estate professional's commissions in a short sale?
In a regular non-short sale, commissions are usually paid for by the seller. Because sellers are responsible for the compensation that was agreed in the listing agreement, lenders that approve short sales are not legally responsible for payment of any commission. Your Real Estate professional will be in communication with your lender to discuss and work out an agreement for commission payment and in most cases, commissions are paid to the real estate brokers as negotiated early on when the lender agrees to allow the home to short sell.
8. How long will it take and what happens if the buyer changes their mind?
A Short sale may take from 30 days to 6 months (or more) to obtain lender approval. The value of the home may decline during this period. The purchase contract will most likely include a Short Sale Addendum which will dictate how long a buyer can and should stay in the contract before they can terminate the contract. In Arizona, the standard Short Sale Addendum allows the buyer to cancel the contract any time prior to obtaining lender approval and the buyer, seller and lender(s) must all agree to the final terms or the contract may be terminated by the buyer. If the value of the home drops during the approval period, the buyer may not have incentive to stay committed to the sale and may cancel due to value and the home's inability to appraise at the purchase price. An experienced listing agent will advise you on terms that can be negotiated to keep the buyer in the contract as long as possible, and it is highly recommended you discuss this with your agent so as to prevent cancellations that may extend the process longer, or even extend it to the point that you have no more time and the home thereby undergoes foreclosure proceedings.
9. When is the earnest money due in a short sale?
As with any real estate contract, the earnest money on a short sale is due according to the terms of the written agreement. It is usually deposited upon fully executed contract terms between the seller/owner and buyer. In a short sale, usually earnest money is not deposited prior to lender approval of the sale. This should be a discussion with your listing agent and is a negotiable item of each individual sales contract.
10. When is the home inspection, mortgage application and appraisal completed?
Every contract will vary on this, however, in Arizona, the Short Sale Addendum allows the inspection to begin only after the lender approval. A listing agent may wish to protect the seller and commit the buyer by negotiating that the inspection take place within 10 days of the seller and buyer's executed contract. A buyer may not, however, wish to spend the money to start the loan, inspection and appraisal process until there is a full short sale approval. Consult with your real estate professional on the best way to proceed for your particular sale. No matter what is decided, the buyer must be prepared for the lender approval to come any day, and thus, must complete his/her due diligence and loan within the dates dictated in the short sale approval. If buyer cannot close on time, the seller's lender could cancel the contract, keep the buyer's earnest money and then the buyer and seller both lose.
You will want to read the FAQ's for Buyers on this site to understand the buyer's side of the sale. Knowledge of the entire process will assist you in understanding the steps necessary for a successful sale so you are not taken by surprise at any point during the transaction. Contact us for more information about your options and confidential information about listing your home for sale.
