Short Sale transactions are one of the most complex processes in real estate and have large consequences on the seller. For that reason, it’s in your best interest to only hire a real estate agent that is experienced in this specialized type of transaction. An experienced agent will increase your chances of short sale approval from your lender, speed up the transaction process, and potentially negotiate for better terms on your behalf.

No. Our fees are negotiated with your lender and are paid out of the lender’s sale proceeds at successful sale of your home. In some instances the buyer pays a buyer’s premium that covers the selling commissions. You will not have any out-of-pocket fees.

In most cases you won’t be paying anything out of pocket. As in a traditional home sale, the revenue from the home sale will be used to pay realtor fees, closing costs, and legal fees.

Determining which is a better route for you specifically can depend on various factors and should be discussed with a real estate attorney. However, completing a short sale offers several advantages over a foreclosure. To begin with, a short sale may be far less detrimental to your credit score than a foreclosure. Short sales may also give you a better chance of securing another property loan in the future than if you had been previously foreclosed on. You can also reduce your chances of paying a deficiency if you pursue a short sale rather than go into foreclosure. Since the lender will typically net much more money from a short sale than from a foreclosure, the deficiency owed may be reduced or your real estate agent may be able to negotiate for “global relief” which will free you from any further debt after the short sale.

You may qualify for a short sale if your mortgage debt has surpassed the value of the home and you cannot continue to make your mortgage payments due to some kind of incurable financial hardship. If you can no longer afford to make your mortgage payments due to loss of a job, medical debt, or legal expenses like a divorce, you will have a greater chance of being approved for a short sale by your lender. When determining if selling your home will cover your debt, remember to deduct selling expenses like taxes, closing costs, and real estate commissions from the sale’s profits. Please note: Loss of equity such as over improvement or general market decline is not considered a hardship unless accompanied by a true incurable hardship in your individual financial situation or personal life.

The final decision is up to your lender, so there is no guarantee. Regardless of if you qualify for a short sale or not, the lender can proceed with the foreclosure process if they choose to. For this reason, it’s important to get an experienced real estate professional to assist you through the negotiation process. Lenders will typically avoid a foreclosure if they’re presented a preferable alternative. Since short sales usually yield the lender more money than a foreclosure will, they’ll likely agree if the short sale option is beneficial to them.

It depends on what type of loan you have. If you have an FHA loan, the short sale approval process is much more complex due to PMI and other factors, and can easily take around 6 months, but we can do a lot of work on a short sale approval before we have an offer. We can work on what’s called an ‘Approval To Participate’. We list the property for sale and immediately submit the short sale package that includes everything except a signed purchase contract from the buyer. The lender then reviews all the seller’s financial information and deems them approved for a short sale. The goal is to determine eligibility, receive approval and determine ‘lender approved selling price’.

Some lenders, including most Conventional loans require for the house to be listed for sale and will only begin determining homeowners eligibility once we find a buyer and have a signed purchase agreement with a buyer. Because houses that are sold via a short sale typically require some repairs, it takes some time to find a ready, willing and able buyer so we learned that it is best to list the house for sale and look for the buyer that qualifies for a mortgage and is able to wait 6 months or more. While we try to find the ’right’ buyer, we begin negotiating with the bank to get the short sale process started and approved.

There are two most likely scenarios. That particular short sale is either by a seller that had an FHA loan (makes no difference to the buyer) and they pre-started the short sale process or it may be an FHA or a Conventional loan short sale that had a buyer under contract but for whatever reason the deal did not work out. Even though that buyer did not work out, the approved price was determined by the lender.

Lenders typically don’t give any portion of the sale proceeds to the sellers. This is because in most cases, the lender will already be taking a financial loss when they complete the short sale.

Relocation Money is available to be used for homeowners moving expenses and rental deposits to move out of the short sale house at time of closing. It is only available for owner occupied properties and it depends on the lender and the type of loan the homeowner took out. When we submit our short sale package, we always ask for relocation money. Ultimately the lender decides if they approve the relocation assistance or not. Relocation Money is never guaranteed and gets approved only in certain circumstances.

Probably not. If you have sellable assets such as investment properties, cash or savings accounts or a steady income, the lender will decline the short sale. A home seller must provide evidence of some kind of legitimate hardship such as a job loss, divorce, illness, or serious damages to the property to qualify for a short sale. If the homeowner has plenty of resources to keep making the payments, the lender will most likely deny the request for a short sale.

Well in an FHA short sale, the lender will typically require that the home be occupied by the homeowner and the home has to be maintained (heat is on, water is on and major issues addressed in a timely manner). For a conventional loan it does not matter. We have processed both, FHA and Conventional short sales on vacant houses so it is very possible for an FHA loan as well, but there is more pressure to prove to the lender that the homeowner ‘had’ to move out due to a particular hardship.

Yes it can. The homeowner or investor has to exhibit some kind of hardship, but yes we have completed many short sales on rental or investment properties.

The process can be long and complex, taking several weeks or even months from start to finish. Exactly how long it will take will depend on several factors. Lenders typically have to get insurers, investors, and their management all in agreement with the terms before proceeding. If you have more than one mortgage taken out on the home, this will have to be done for each individual mortgage, prolonging the process. Getting an experienced real estate professional to handle the negotiations is critical to the short sale success.

Every short sale is different and no two are ever the same, but to provide a very vague timeline, a homeowner that borrowed using an FHA loan can expect a process that can easily take 6 months. A homeowner who borrowed using Conventional financing, the expectation is around 3 months. Your individual situation such as the hardship, finances, completion of the short sale package, the lenders responsiveness and number of liens on the house will dictate the length of the process.

Yes, all types of mortgages qualify for a short sale!

FHA short sales are extremely lengthy. It can take around six months. If there is more then one lender or additional liens, it can add months to the process.

A conventional loan short sale, with only one lender averages to about three months. No two short sales are the same as it will depend on the lender, the homeowners financial situation and type of hardship as well as the number of liens, but to set expectations, we are comfortable providing these very rough estimates.

If the loan has mortgage insurance that tends to be a challenge especially if it is with a servicer. We have to get two parties to agree to approve the short sale. While we are very diligent with our follow-ups with the lender, once we receive the lender approval the file is sent to ‘mortgage insurance’ for approval and it can take months to hear back. Loans with private mortgage insurance are much more complicated and unfortunately, on a rare occasion the lenders will not approve a short sale because they can file a mortgage insurance claim and receive more money if the house goes into foreclosure versus allowing a short sale.

While it will prolong and complicate the process, it is still possible. The primary hurdle in this situation is that we now must get all of your lenders on board with the short sale rather than just one.

We do short sales with multiple lenders all the time. The process is longer and more paperwork is required, which can be very tiring for the homeowner, but we close short sales with multiple lenders often. Expect at least 3 to possibly over 6 months of negotiations as each loan or lien adds time to an already long process.

There’s no guarantee that attempting to short sell the home will prevent foreclosure. You may, however, be able to convince the lender to postpone a foreclosure for short sale negotiations. Since the short sale will likely be a favorable alternative for the lender as well, there is a good possibility that they will be open to it. If you don’t ask, you may never know!

The homeowner can be current, but it doesn’t really give any incentive to their lender to do a short sale. We have processed some short sales with sellers being current on their payments, however… We still have to demonstrate a hardship and if everything goes well, we can get a short sale approval. Most of the time, if the seller is current on their payments, the lender will require the seller to be at least 31 days delinquent at closing. If you are able to continue making mortgage payments, please do. Once we get an approval letter while you are current on your payments, we will determine your lenders requirements. The ‘approval letter’ is typically valid for 30 to 45 days. If lender requires a 31 day delinquency, the seller would have to be 31 days delinquent before we can close.
As always, the final decision is up to your lender, but they may be willing to agree to short sale terms. Remaining current with payments through the short sale process may also qualify you for FHA loans after the sale without a waiting period. If you have missed months of payments or are foreclosed on, that option will not be available. Foreseeing the issue and getting an early start on it can help improve your future circumstances.

A deficiency is the difference between what the lender will make from selling your home and what is owed on the home. For example, if you owe $250,000 on your home, but the lender only nets $200,000 in the sale, the lender can seek the additional $50,000 in deficiency. This means that you may end up still owing a large sum even after you’ve lost a home.

This is a loaded question. Legally yes, the lender can sue the homeowner for the $50,000 deficiency. However, when we negotiate with the lender(s), we mandate that the short sale approval letter will state that the lender will not sue the homeowner for the loan deficiency, but, the lender may or will send the homeowner a 1099 after completion of the short sale as the deficiency can be counted as taxable income to the homeowner.

We cannot give tax advice, please consult your tax attorney or an accountant. Ask your tax professional about Mortgage Forgiveness Act, and if it applies to you as it may provide relief to you and you may not have to pay taxes on the deficiency. Ask your tax professional if the lender does send you a 1099 for the deficiency amount and if you can prove that you are financially insolvent, would you be liable for the tax obligation.

The Further Consolidated Appropriations Act of 2020 seemed to extended Qualified Principal Residence Indebtedness (QPRI) exclusion through 2020. This act seems to allow some taxpayers with a forgiven mortgage debt to exclude that cancelled debt from their income. This seems to include both foreclosures and short sales. Meaning you may not seem to be liable to pay taxes on any forgiven loan debt if you qualify. This act, however, is seems to be meant for principal residences and won’t assist anyone selling a rental property or other form of secondary property. Please consult your tax attorney or an accountant.

If you do not qualify for the exclusion, you may only be taxed on the portion of your debt that is forgiven. For example, if you owe $250,000 on your mortgage and the home sells for $200,000 but the debt is considered fully satisfied, you may be subject to income taxation on the $50,000 that was forgiven.

Since tax information is rarely a “one-fits-all” situation, the specifics of your taxes should always be discussed and confirmed with your tax professional. Please consult your tax attorney or an accountant.

“Release” can be a tricky subject because it can have two meanings. It basically breaks down to release of liability and release of the mortgage. The lender may choose to release the mortgage from the home for less money than they are owed, but that doesn’t necessarily mean that they have released the homeowner from their responsibility to pay back the difference. Release of the mortgage will allow the home to be sold and help you to avoid a foreclosure, but it won’t release you from your liability to repay the debt. The difference between what the home sells for and the total obligation owed (sometimes called a deficiency) can still be sought by the lender after the sale is complete. Nuanced terms like this are another reason why it is important to hire an experienced real estate professional to help you work through these dealings. When we negotiate your short sale, we insist the approval letter states that the lender releases their ability to sue you for the deficiency.

In short yes they can and on a very rare occasion they do. It is very rare though. This was more common several years ago and we have not seen many short sales lately where lender requires a seller to contribute cash at closing. The lender can request seller to bring cash if the homeowner’s finances show the homeowner having cash in their accounts. The lender will typically ask for a ridiculous amount, for example in the past we have had a $20,000 or a $10,000 request that we have negotiated to Zero. However, it is important to note, that we have had sellers that ended up having to bring $1,000 or $500 or $100 to the closing. The amount, if any, will heavily depend on the individual short sale situation, especially on the sellers personal financial position. In a vast majority of cases, the homeowner is selling their home because they have no money and if we demonstrate absence of money, the lender understands that there cannot be any cash contributions form the homeowner.

In short, ‘No’. Because you were the person applying and taking out the mortgage, you are the primary person responsible for the payments. When the house is deeded into someone else’s name, that someone has control of the house. Ownership or control of the house and the mortgage loan attached to the property are two different things. Additionally, it may not be possible to sign the deed over to someone else as the title of the house belongs to the bank holding the unpaid mortgage note on said house.

No, leave everything as it is. Your house will be sold as-is to a buyer that understands that there may be items the buyer will need to take care. Sellers considering a short sale are usually in a financial hardship and we do not want you to spend any money on a home you no longer can afford. Continue maintaining your home as you always do and if you can, clean up and declutter, however if you cannot, leave everything as it is. We will find the right buyer for your home, no matter the condition and the necessary repairs the home may need.

If your house requires immediate attention, such as storm damage, please address it if you can.

In theory, yes, but we take measures to minimize the risk. We prepare a special addendum that ensures the buyer is committed to a certain number of months and we require a financial deposit that the buyer loses if they back out before the ‘allowable’ time for us to process the short sale with your lender. The buyer can, in theory, walk away but they would need to forfeit their security deposit. On the other hand, we cannot keep the buyer locked into the contract indefinitely and have to limit the ‘commitment’ to 3-6 months. If after specified number of months the lender does not provide us with an answer or an approval letter, the buyer can be released from the contract and receive their deposit back. The buyer may choose to agree on an addendum extension giving us additional few weeks to negotiate with your lender, but they are not obligated to do so at the expiration of the addendum.

No warranty in majority of the cases. As far as the closing costs, on FHA short sales, the rules seem to say that they will give 1% to an FHA buyer and only an FHA buyer but we can ask for variants of up to 3% for an FHA buyer. So in short, Yes, but – our goal is to find a buyer that does not require closing cost credit. If we submit an offer that asks for 3% credit towards buyer closing costs, and your lender denies the request, it can add days or weeks to the negotiation process with the going back-and-forth.

Several factors can make a short sale unsuccessful. To begin with, many real estate agents are not qualified to handle short sales. Your past agent may not have properly negotiated the sale with your lenders. Hiring a reputable realtor with a successful track-record may yield different results. Alternatively, the realtor may have done a fine job, but the market was not ideal for a short sale. A deal that was unacceptable to a lender several months or a year ago may be desirable now due to fluctuations in the market and availability of recently sold comparable homes we can use to appeal the lenders approved price. A change in either, or both, of these variables might yield a different result when trying to short sell your home. If the lender declined the short sale due to your financial situation, we may be able to appeal, especially if your financial situation has been getting progressively worse.

The lender will not allow a short sale during the bankruptcy proceeding.

Yes, absolutely, you can continue to live in your home until the sale is completed and the house is transferred from your name into the new buyers name. In fact, the lender prefers you live in your home and continue to ‘maintain’ it by keeping the electricity and water ‘on’ and addressing any immediate concerns such as storm damage or flooded basement.

Our recommendation is not to rent our your house before or during the short sale process. Your lender will not look favorably at the fact that you are collecting rent and may not be paying your monthly mortgage payments. Some tenants will automatically disqualify your house if it has been rented in the last 6 months. Additionally, your tenant will have legal rights and the lender does not want to deal with a potentially troublesome tenant.

If the potential profits from a home sale cannot cover your selling expenses and mortgage, a short sale may be your best option. Unless you can somehow catch up on the debt, the situation will likely get progressively worse, eventually driving you to a foreclosure and further debt. Please note, loss of equity alone is not enough to qualify for a short sale, there has to be some kind of exhibit of hardship. However if you think you may be facing foreclosure down the line if you do not sell your home, there may be an opportunity for a short sale. Every situation is different. Selling the home through a short sale can offer you a potential escape from the financial deficit and is worth looking into.