What is a Short Sale?A short sale is when the lender will accept less than the full amount due on a mortgage when a property is sold. Usually, the lender will accept the short sale to avoid the time and expense of a foreclosure. It involves a complex process involving changing rules whereas the lender can veto a transaction for any reason and a buyer that may not have the patience to wait while the lender makes up their mind. This is not a do-it-yourself project.

Does every lender grant a short-sale? No, each lender will examine and execute terms differently, some may grant a short-sale, some will modify the loan and some will proceed to foreclosure.  The potential problems are immense and that is one of the main reasons that you need a specialist assisting you with this process.  

What is involved to do a Short Sale?

• Calculate the value of your property. This will be accomplished by preparing a CMA and looking at the competition that is in your area and the condition those homes are in.  I will need to price and position your home so that it sells quickly and at a high enough price that the lender will agree to the terms.
• Calculate your home's financial position.  In this step I will examine the value from step 1 and compare this to the mortgages and other debt that is supported by the home value.  If your home value is significantly less than your debt tied to the property you are a candidate for a short-sale.
• I will start searching for a buyer, especially those that have expressed interest in buying short-sale properties.  Not every buyer will want your property given the status and tenuous nature of a short-sale.  The buyer must be willing to deal with extended deadlines and additional demands made by your lender.  Your lender is the key to a successful short-sale transaction and I will need them to feel confident in the new buyer.
• I will need to contact your lender and explain your situation. Lenders are under no obligation to accept a short sale and the terms of the short-sale will be examined closely by the lender. The lender is the ultimate decision maker and will be the final approval for short-selling your home.  Lenders may disapprove of any aspect of the transaction without reason or justification.  Lenders do not have to be reasonable.
• There maybe tax repercussions in enacting a short-sale transaction.  Part of the process I will cover is the tax liability that may remain after the short-sale transaction is complete.  As with any tax related matter I will advise you to seek counsel from a tax professional or tax attorney. 

Will the bank come after the homeowner for the difference? I will always negotiate with lenders to "Not seek a deficiency judgment" against the homeowner.

Is the seller going to get hit with a tax bill or a 1099 if you do a short sale? Upon successfully closing a short sale, lenders will always report a loss to the IRS and issue a 1099. However, the Mortgage Forgiveness Act of 2007 was signed into law on 12-20-07 and is now official, effectively getting rid of the question, "Will I be taxed on the Short Sale?" Prior to this action, forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure, was potentially taxable income to the borrower.This was the subject of much media attention and led to many questions and concerns from Sellers wondering whether or not they were going to get "hit with taxes" on the Short Sale.The new law, however, temporarily waives these taxes for debts forgiven (as high as 35%) from the beginning of 2007 to the end of 2009.This will effectively put an end to the question from Sellers... will I be taxed on the Short Sale discount. The definitive answer (at least until the end of 2009) is NO!For a copy of the Mortgage Forgiveness Debt Relief Act of 2007, go to:  http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html

Will the homeowners credit be affected? If the homeowner has to short sale their home they've most likely missed payments already. That in itself has already adversely affected their credit. The key here is to stop the devastating affect on your credit that a Foreclosure causes. A Foreclosure is the most damaging record on your credit report - it's even worse than bankruptcy.By working with me, you give yourself a fighting chance of avoiding foreclosure and start towards the "Rebuilding" process. With my help, your credit will recover quickly if you keep your other lines of credit in good standing. With me, you have an experienced professional that will help you through these tough times.

Is a Short Sale right for me and my situation? 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, and are 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 costly foreclosure.

What sort of hardship would my lender consider legitimate? To some extent, that will depend upon the mortgage company considering the short sale request. Generally, as long as the hardship is real and the mortgage company believes the loan is likely to become delinquent as a result, the short sale request will be processed by the Loss Mitigation Department. A big key to getting Loss Mitigation to accept a hardship is to submit a strong hardship letter. The hardship letter sets the tone for the entire file.

• Death of a borrower
• Illness of a borrower
• Illness of a borrowers family member
• Death of a borrowers family member
• Marital difficulties
• Curtailment of income (reduction of income of a borrower)
• Excessive obligations - same income, including habitual non-payment of debts
• Abandonment of property
• Distant employment transfer
• Neighborhood problem
• Property problem
• Inability to sell property
• Inability to rent property
• Military service
• Temporary loss of income due to layoff
• Health/Medical reasons
• One-time repairs (home, auto, etc.)
• Other Temporary loss of income

• Quitting a job
• Leaving a job to stay at home and care for children
• Voluntary reduction in hours worked, reducing pay
• Seasonal layoff from a job
• Quitting a job to go back to school

Will the lender approve a Short Sale even if the homeowner is current on their mortgage? Yes. I can negotiate and receive an approval on a short sale even when the homeowner is current on their payments.

Why would a mortgage company agree to accept a short sale?There are actually several reasons why a mortgage company would approve a short sale payoff, including the following:

• Legal Concerns: Mortgage lenders have come under legal pressure to work with borrowers to equitably resolve situations where borrowers are unable to meet their mortgage obligation, particularly when the borrower makes an effort to arrive at a compromise solution.
  
  
• Wall Street is Watching Mortgage lenders rely heavily on their ability to package and sell bundles of loans on the secondary mortgage market. They need to sell these bundles of loans in order to put the funds back to work by loaning the money again and collect loan fees along the way. If mortgages perform poorly after they are sold it could impact the lender's ability to sell their loans on the secondary market. A successful short sale gets the loan payoff resolved quickly.
  
  
• Asset Management Expenses - If a lender acquires a property through foreclosure, the property will be managed until it is repaired and resold. It is expensive to manage real property assets - homes - spread throughout the region, the state and possibly even the nation. Keeping properties maintained, keeping utilities on, making repairs and the administrative costs attached to these activities are all costs the lender would prefer to avoid. A successful short sale eliminates most of these costs.
  
  
• Reserve Requirement - Delinquent and non-performing loans place another burden on mortgage lenders. For all delinquent and non-performing loans lenders must set aside funds in reserve to deal with potential losses. These funds cannot be put to work generating new loan fees until the bad loans are resolved. A successful short sale lets the lender put their money back to work.

Can I still short sale my home even if I have 2 loans? Yes, it doesn't matter how much you owe. The lender will evaluate what the current market value is and then decide how much they will accept.

Can I still do a short sale even if the property is in very bad condition? Yes. Lenders are more motivated to do a short sale on a property that needs work than on a property that doesn't. Lenders know losses start to skyrocket when they foreclose on a property that needs a lot of repair work. Lenders are in the business of lending money not property management and home repairs.

If I am behind in my payments and can't afford closing costs what can I do? Lenders are understanding when it comes to this situation and will actually pay the REALTORS® commission and your closing costs.

Is using a Certified Short-Sale Professional (CSP) really necessary? If your goal is to remain out of foreclosure than using a CSP is a great advantage.  CSP trained agents know how to work with lenders and how to present the offer to a lender that will make the lenders job easier and more likely to agree favorably.  Understand that there are hundreds if not thousands of requests for short-sales.  If a lender sees a well presented and thorough package compared to a package that will need much time and attention, which do you think will get the preferential treatment?  Additionally, your CSP trained agent has connections with many lenders, local and national, and will understand the best way to guide your package through the system.