Time is of the essence when it comes to working a short sale. You have to make your decision early in the process to allow us negotiating time with the bank. We’ve prepared this list of FAQ for you about a short sale.
Q: What is a short sale?
A short sale is a sale of your property where the bank agrees to accept less than what is owed as an alternative to foreclosure. They agree to accept a payoff that is “short” of what is actually owed. We can sometimes convince a lender that its in their best interest to do so.
Q. How long will it take?
It may take weeks, or months to get an approval. Lenders have several layers of red tape. We cannot guarantee a timeline.
Q: Is a short sale guaranteed to work?
No. If you continue to not make any payments during the negotiation process, your house will continue to auction. If the bank cannot agree to an amount acceptable to us, the negotiation process will fail.
Q. If a short sale doesn’t work, what happens?
Your house will likely continue the foreclosure process toward the auction at the courthouse steps. We make NO PROMISES that we will succeed.
Q. What are the potential consequences to me of a successful short sale?
We will have you sign a disclosure agreeing that you know the consequences. But for now, there are one of two typical consequences.
- Deficiency Judgment. The bank can file a judgment against you for the amount that was declared short. They can then pursue that from you. Consult your attorney for more information.
- Forgiven Debt. The bank may declare your debt forgiven and report that amount on a 1090-MISC to the IRS. You may be responsible for taxes owed on the amount forgiven. Consult your tax advisor for more information.
Q. Do I have to move?
Yes. It is a short SALE. This approach will not allow you to keep your house.
Q. Can I get any money at closing?
No. Since the lender might agree to accept less than what is owed, you are forbidden to receive any money that should go to them.
Q: What do I need to start the short sale?
Once you decide to proceed with a short sale, you will need to order the following from your lender(s):
- Short sale packet. The bank may give you a list over the phone
- Normally, a hardship letter, pay stubs, tax returns or other financial records.
- Payoff amount good thru end of the current month.
- Reinstatement amount good through the end of the current month.
Q. Once I get these items, then what?
We will visit the property and start going over the paperwork with you. Because of the quantity of short sales that we are asked to process, we do not start until you have received those documents from the bank. We only have time to deal with sellers who are motivated to retrieve the information we need in a timely fashion. The biggest reason we might be unsuccessful in short sales is that the Seller fails to give us these documents in a timely matter.
Q. What if I only have one mortgage and a pretty house?
In our company’s history, this is unlikely to succeed. We’ve tried a few and found that most lenders are not willing to work with us. But we are still willing to try.
Q. What if I have two mortgages?
If you have two mortgages, with different lenders, we might have a solution for you. We’ve been able to successfully complete the process where different lenders are involved.
Q. My house is tied up in Bankruptcy Chapter 13. What impact does that have?
I don’t have an answer yet. I’ve got so many cases that we are working on, we’ve typically ignored this. However, once we get an answer, we’ll post it here.
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