What is a short sale?
A short sale is when you owe more on the property than its' worth and you need to sell it because you have a hardship. Hardships can be anything from income loss, divorce, having an adjustable rate and not being able to afford the payment.
How do I qualify for a short sale?
Qualifying for a short sale in my opinion is just like qualifying for the loan. You have to prove to the mortgage company you are in hardship. They want your bank statements, tax returns, pay stubs, and a hardship letter.
Do I have to call the bank, because they're calling and all they want is money?
People that are calling 9 times out of 10 are collections, they do just want money. And, once you hire us, we call the bank for you! We do all the negotiating for your short sale.
Do I have to be late on my payments to do a short sale?
No, you do not have to be late on your payments to request a short sale. We negotiated a short sale for a couple who were getting a divorce and had not missed any payments.
Do I have to continue to pay my Homeowners Association Fee?
I always recommend you continue to pay this, some banks will pay it and some will not. We never know until the end what they will pay and what they will not. Also, if you stop paying your HOA will turn it over to an Attorney and what was once $1000 in late HOA fees, is now $6000 in late fees plus the attorney fees. So, it makes it harder to request payment from your bank to pay this.
What if I have 2 or 3 Mortgages? Do they all have to agree? And what happens if they don't?
If you have more than one mortgage they all have to agree to the short sale. The first mortgage is in first position and they call all the shots. They determine what the second and third get if anything. They all must agree. We negotiate for you so this will happen. If they don't the home does not sell. We've never had this happen.
What if we bought a house before the market turned, rented it, now the first home's mortgage is adjusting and we can no longer afford the difference between the rent and the mortgage, should we just let it go?
Great Question!!! No!!! First, I'd recommend trying for a loan modification. It sounds like a hardship, its' up to your bank to agree and your finances must coincide with what's happening. So, loan modification first, short sale second, a Deed in lieu third and letting it go as a last resort. And you may want to ask your bank, what if I just let my house go? Will you come after me or no?
What if I haven't a paid my taxes on my house?
We always ask the bank to pay all of your fees, taxes included. However, in the event they don't, we always ask the seller to save your money. Please don't go on a Disney Vacation while were negotiating your short sale. We haven't had this either, but we are very cautious. We want your short sale to be approved.
What if I paid my taxes, will I get them back? NO
What if I know someone who wants to buy my house? Or one my family members?
If they want to buy your home, they must still qualify under the new lending laws of today. I also recommend still placing the home on the market for other buyers, friends and family tend to change their minds and if you need a short sale, you want to chose a buyer who is going to perform, this is no time to phone a friend.
Banks also frown upon an "Arms Length" transaction, where your buyer is related to you. They will not allow sisters, brothers, moms or dads to buy your home as a short sale. Some banks will have you sign an agreement to agreeing to that.
Can I refinance and remove me from the loan and my spouse can have it?
No, unless you have equity, you will not be able to refinance. You need equity. Also, I haven't seen the banks allow an arm's length transaction. Where a family member, sister, wife, brother buys the home as a short sale. They do not allow that.
If you want to keep the house I would recommend a "loan modification". Now remember, you must show income to prove to the bank you "can" make the payments.
What are the fees? Do I have to pay anything?
We always ask the bank to pay all of your fees, taxes, HOA's, escrow, title, and any arrearage.
Do I have to fix anything in the house before I sell it?
Many sellers are in hardship and cannot afford to fix anything in their house. Therefore, the home is usually sold as-is. We always request termite clearance as it is required for many buyers loans and ask the bank to pay it as a seller's fee.
I stop paying my second but I'm still paying my first, does it matter?
YES! The second is just as important as the first, either one can foreclose! Also, if you stop paying the second long enough, they may turn give your file to an attorney and attorneys no longer want a smallpayoff, they go after 10-25%. So, treat them the same!
What about the balance? Will I owe all that money?
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2015. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home's value or the taxpayer's financial condition.
More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.
What does the letter say if the short sale is approved? What should I look for?
Many banks will say the bank agrees to release the lien for a minimum payment amount. This amount is minus all the seller's fees- back taxes, HOA arrearage, escrow, title, commissions and any closing cost the buyer needs and the bank agrees to pay. They arrive at this number based on the appraised value and what their investors want. On your first lien holder's letter, they will always say what their offering your second. In some cases Seller's must sign the approval, so read it!
Click here to see examples of short sale approval letters
What will my credit look like after the short sale?
In some cases, not all, your lender will say how they're going to report to your credit buereau.Some could read "Charged Off or Account Settled for less than full balance" I personally have not seen a credit report that says anything different.
Will I be able to buy a home after I do a short sale?
I'm sure you will be able to purchase a home after your short sale. You can buy after 2 years of having a short sale. The question is what will the new lending regulations require you to do? Now that lending is regulated by the government and laws change constantly, no one knows what the future holds. I would recommend saving your money for a pretty good down payment.
What happens when I miss 3 mortgage payments?
In California, the foreclosure time line is as follows:
Once you miss 3 mortgage payments you will receive a "Notice of Default". The letter will look like this:
Click here to see an example of that letter
This letter is recorded in the county recorders' office and it is not public record that you have missed 3 payments. This is called "pre-foreclosure". Right after this is when you want to make a decision, do I want to short sale the property, try a loan modification, something!!! Either one can take 3-4 months.
After 3 months, the property can be put up for sale. You will receive a certified letter and by regular mail, and posted on the front door saying "Notice of Trustee Sale"! You do not want to wait until it gets to this point!!!
Click here to see an example of that letter
21 days after that letter is posted and received, the home could be sold to the highest bidder on the court house steps or go back to the bank.
LOAN MODIFICATION INFORMAITON
Do I have to hire someone to do a loan mod?
My bank said I qualify for this New Program!
I recommend getting someone to help you do a loan modification. In my opinion, negotiating your own loan modification is like negotiating your loan when you bought it. Banks say, fax in your pay stubs, bank statements, tax returns and write us a letter. They don't tell you how they're going to qualify you, they just say, send it in and well call you. Then, they call and say.. you don't qualify. So, get some help!
I know loan modification companies that know each banks criteria. They underwrite your file before they send it in. They will let you know if it can be done before you pay any money, and their backed by an attorney. Below is some information on how they will work with you in getting your loan modification approved. If you are interested in a loan modification, please contact me and I will refer you to the company who has had success in obtaining approvals for clients.
Here's a very recent letter of a loan modification recently approved.
Click here to see an example of a loan modification approval