Short Sale Faq's

1). What is a Short Sale

A shortshortshort salesalesale is a type of real estate transaction in which a property is sold for an amount less than the bank is owed. As the term “shortshortshort salesalesale” implies, the bank comes up “shortshortshort,” but it may decide that allowing the property to be sold is a better deal than foreclosing on it and handling the salesalesale that way. ShortShortShort sales are typically used by people who owe more on their homes than the home is worth, or by individuals who have difficulty making their mortgage payments.

2) When is the best time for me to start the process for my Short Sale?

It is best to begin the Short Sale process as soon as you realize that you have an unaffordable payment for your budget; you know that your loan owes more than the ‘Fair Market Value’ and cannot sell for what you currently owe; or you have little equity in the property which won’t cover the realtor, closing, or any other associated costs that you need to cover in order to sell the property.

3) Why would my Lender want to allow a Short Sale to help me?

It’s simple really. Often a short sale has a far better return on an investment to the lender than a foreclosure. The average savings a lender sees from a short sale property is far higher than the savings of a foreclosure property. Not only does the lender receive higher savings when they allow a short sale, they also get paid on the loan 6 months earlier than in the foreclosure process. This allows them to collect and cash-out earlier than they would if they foreclosed on the property. Not to mention the costs the lenders have to pay their attorneys to complete the foreclosure process. Lenders created the short sale process as an alternative to foreclosure for those reasons. It is a win-win situation for the banks to allow short sales. They do not look at this as helping you, they look at it as a positive solution to a very costly and time consuming issue.

4) How long does the Short Sale process usually take?

The entire process of a Short Sale generally takes 60 to 90 days (2 to 3 months). All situations are unique and therefore we cannot guarantee a specific amount of time.

5) What is the difference on my Credit between a Foreclosure and a Short Sale?

A Foreclosure will show as A Foreclosure or A Debt NOT PAID.  It is a very negative mark on your credit that can stay there for up to seven years!  A short sale will show as – Debt Paid or settled.  It is a much better mark and will make it easier for you to get credit in the future.  Please consult one of the three major creditors for further explanation.

6) What are all of the liabilities when doing a Short Sale?

On December 20, 2007 President Bush singed a measure to provide financial relief for financially strapped homeowners facing foreclosure.  The bill gives a tax break to homeowners who have mortgage debt forgiven as part of a foreclosure or renegotiation of a loan.  NO TAXES WOULD BE OWED ON THE VALUE OF ANY DEBT FOREGIVEN OR WRITTEN OFF.  Currently such debt forgiveness is taxable income.
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Always consult your local CPA for further information on this matter.

It is important to note that if a property should go into foreclosure and is sold at auction the difference in the amount you owe on your loan and the price the lender will get on a foreclosure sale is much higher than the discount they will give at a short sale.  Completing a successful Short Sale will eliminate a Deficiency Judgment from happening and minimize the tax liability you may have.  It will also stop you from having a foreclosure on your credit.

7) What is a Deficiency Judgment?

A Deficiency Judgment is what can happen if the bank sells a house in a foreclosure sale auction.  The bank has the right to sell the house for an amount less than the debt owed and all other fees they may have.  If the house sells for less than the mortgage debt, then a Deficiency Judgment can be placed against you.  By this you will be held responsible for the portion of the loan that was unpaid.  Example:  Initial Mortgage Loan of $400,000.  The bank collects $300,000 at a Foreclosure Auction.  A Deficiency Judgment is placed against you for $100,000 which is the difference.  If this is placed on you it will also show on your credit along with the Foreclosure.  Once this is placed as a judgment against you the lender can proceed with further legal actions and garnish your wages to collect on the debt.  Some states have regulations and restrictions on Deficiency Judgments, but unfortunately MOST DO NOT.

Once again, this is where the team's presence in a short sale negotiation is invaluable as we will negotiate with the lender to agree on a “release” and “satisfy” position, which mean no deficiency judgment to consequence the short sale.

8) Why hire Silicon Valley Short Sale Specialists?

We are experts at short-sale proceedings and work with all of our clients in top confidentiality, integrity and thoroughness.

9) Do I need to sign a Power of Attorney when processing a Short Sale?

NO!  At no time should you have to sign a power of attorney to process a short sale.      

10) Can you negotiate a Short Sale when a home has more than one mortgage?

Yes.  The process is the same regardless of the number of liens.