Q.  Why do I have to submit a Short Sale package?

A. In short, because lenders require it.  Lenders need to have a compelling reason to work with the seller.  By providing tax returns, bank statements, pay stubs and other forms of household income and expenses along with a detailed hardship letter, the lender has a true an accurate picture of the sellers’ circumstance.  IFR works with sellers to complete a thorough and effective Short Sale package.

Q.  Will a Short Sale hurt my credit?

A. The term “Short Sale” is not reflected on the sellers credit report.  Many times a Short Sale is reported as “Paid-Settled” which will most likely lower the sellers credit rating.  The alternative, however, would be foreclosure which can significantly damage a sellers credit rating for years to come.

Q.   Will a lender forgive the outstanding balance owed when they accept a Short Sale?

A. During the short sale process, IFR negotiators request that the lender forgive the balance owed and not pursue the seller for the deficiency.  If the lender agrees, then the release is confirmed in writing prior to the payoff.  If the lender does not agree, it will be the seller’s decision whether to proceed with the Short Sale or not.

Q.   Will the bank pursue me for the differences I owe?

A. It depends.  The factors that determine if a bank will pursue the difference depend on the type of loan on the property (recourse or non-recourse) and where the property is located.  IFR negotiates with our client’s best interest in mind and always seeks a release of future liability in writing from the lender.

Q.   Does a “hardship” have to be present for a Short Sale to occur?

A. Yes, a Short Sale is for people suffering financial and/or personal hardship(s).  A Short Sale is not simply an escape from a bad investment or an ill-suited loan, a true hardship must exist.  Lenders are placing an increased focus on whether there a true hardship exists.  IFR helps our clients submit a compelling hardship letter to demonstrate the difficult hardships that exist for our clients.

Q.   Can I sell my property for any price?

A. No, lenders research comps in the area and will generally not accept an offer that is below the market value.  In general, if your lender believes it is better off financially to foreclose, it will do so.  A lender can also proceed to foreclosure if the borrower does nothing, submits an incomplete Short Sale packet, or submits unreasonable low offers.  IFR works with the Listing Agent and the Buyer’s Agent to ensure all parties have the information they need to close the property as quickly as possible.

Q.   Will I get any money from a Short Sale?

A. Not usually.  Most lenders will not allow a borrower to receive any money from the transaction because the lender is taking a loss.  If the lender thinks you are getting paid from the sale, they will terminate the Short Sale.  While IFR cannot negotiate for proceeds from the sale to go the seller IFR does negotiate with the lender for the best possible credit reporting for our clients.

Q.   Are there tax consequences to a Short Sale?

A. To determine the tax consequences each seller needs to consult with the IRS and/or their accountant.  The consequences could vary taking into consideration the recent passage of the Mortgage Forgiveness Debt Relief Act.

Q.  Can you guarantee that my lender will accept a Short Sale?

A. While IFR makes every effort to negotiate effectively with lenders no guarantee can be made that lenders will accept a Short Sale offer.  IFR makes it a point to show the lender why it is in their best interest to accept the Short Sale and close the sale.

Q.  How long is the Short Sale process?

A. A Short Sale transaction generally takes between 2-3 months to complete, but it ultimately depends upon your lender.  Some lenders respond very quickly while others require consistent follow-up.  IFR ensures your file does not get forgotten.

Lou Dobbs Video on Subject

Related articles

• 75% of modified home loans will redefault (money.cnn.com)
• State warns about short-sale scams (lansner.ocregister.com)
• The Complete Short Sale Process How a Short Sale is Handled from Listing to Bank Approval (visionaryrealtynews.com)

Filed under: Business Services, Listing Presentation, Real Estate Market, Selling, Short Sale, VRN