What is Short Sale?

A short sale of real estate simply means that the the home (or other real estate) is sold for less than the amount owed to the current lender(s).  WHAT?  You mean I can sell my home for less then what I owe?  Yes, but as you would expect you must have the approval from the lenders that currently hold the note(s).  Be aware there are tax, credit and potential difficiency issues you need to be aware of before you decide whether a short sale is right for you.

I'm behind on my payments, how long before the bank forecloses my home?

The bank can begin the foreclosure proceedings once you are 30 days late, but will usually wait 3 or more months of late payments, this is very much bank specific.  To initiate the foreclosure process the bank issues and records a "Substitution of Trustee" followed by recording a "Notice of Trustee Sale".  After recording the notice, they are required to provide 90 days before the actual foreclosure auction.

My foreclosure is coming up and I think it's too late for a Short Sale, should I just let it go?

That's your decision, but until the "the gavel sounds" at the auction, so to speak, it's not too late.  However, the more time you give the better the chance at success.  Many Realtors will require a minimum of a month prior to auction, but everyone is different.  We've personally done multiple short sales where they were within 2 weeks of the auction.  Give us a call and let's talk.  If you want to make the attempt to stay out of foreclosure we want to help.

Can you as my Realtor advise me on Tax issues, how my credit will be affected, or legal issues such as deficiency law?

By law a Realtor, including me, can not provide advice that is "beyond their scope of expertise". Though there may be Realtors that are also CPA's or Attorney's my guess is that they are few and far between.  As a Realtor, real estate professional, we can advise you on buying and selling real estate and again, by law, we can not advise beyond that scope.  For specific questions on the multiple issues that can come into play during a Short Sale you will want to talk to the person who can legally advise you on issues that are beyond the scope of your Realtor.

Are there TAX ramifications to a Short Sale?

There are very few Realtors that have a CPA, including me.  To fully understand the tax ramifications of a Short Sale you need to talk to someone who is licensed to advise on tax issues such as a CPA or a Tax Attorney.  This is not only important for the obvious reasons but because things are constantly changing, the right person will have the latest information.

Understand that lenders are required by law to issue 1099's when they forgive a portion of debt - this is where the questions about taxes come up "do I have to pay taxes on this difference".   Well, this depends whether the home is your primary residence or not.   The IRS website helps answer this at http://www.irs.gov/individuals/article/0,,id=179414,00.html where it discusses the Mortgage Debt Relief Act of 2007.   Do yourself a favor, talk to a CPA or Tax Attorney to discuss your specific individual situation.

Are there CREDIT consequences to a Short Sale?

Yes.  With that said remember very few Realtors are Credit experts, CPA's, Tax Attorneys or Lenders - including me.  Even asking the "right" people you will likely get different answers not only because Lenders may report differently, but everyone has a different level of "credit distress" and it should be discussed with a trusted source on a one-on-one basis.

Will my Lender come after me for the deficiency, or the difference in what was owed and what was paid in the sale?

Here we go again ... you want to talk to a Tax Attorney, as many Realtors are not Attorney's, including me.  However, Arizona is a non-deficiency state (click here for AZ statutes), so in most cases you do not have to be concerned with being responsible for any deficiency.   There is legislation in the works that may change this for certain individuals so you want to talk to the right person to get the latest and greatest information.

How do I know if I qualify for a Short Sale?

If you are in a situation where you can no longer afford your home and the value of your home is less than what you owe, you will likely qualify for a short sale.

I want to Short Sale my home, what should I expect?

The Short Sale process includes, but is not limited to the following steps:

1. List your home with a qualified Realtor
2. Provide documentation to your Realtor for Short Sale submission
3. Accept an offer to submit to the bank
4. Wait for the bank(s) approvals of your loan (anticipate 4-10 weeks)
5. After approval - provide Agreement Notice to Buyer
6. Escrow is open
7. Successful close of escrow

Do your charge a fee to help me with a Short Sale?

No, I believe purely in getting paid for results.  If I am not successful in helping you sell your home, I personally do not believe I should be compensated for work I did not finish.  For that reason I do not charge any fees to my clients and rely soley on commissions paid by the bank when the sale is successfully complete for my compensation.

When I Short Sale my home with you do I have to put a sign out in front of my house?

I leave this decision completely up to you, I do not require it.  Some of our clients do not want to advertise their situation to friends and neighbors and ask not to have a sign out front.  Others want the attention.  Having a sign out front can generate additional calls from prospective Buyers, not only those driving through the neighborhood, but by neighbors who might know friends or family looking to purchase a home nearby.  Having a sign out front also makes the home easier to locate by Realtors bringing potential Buyers. 

What type of documentation do I need to make available to do a Short Sale?

The documentation requirements from the home owner are very similar to what is required of a loan modification or any other negotiation with your Lender:

• A hardship letter
• A completed financial statement (provided by your lender or Realtor)
• Paystubs or other proof of income
• Bank statements
• Taxes from previous 2 years
• Authorization to release information

When is this documentation required?

The above documentation is obtained as part of the initial meeting to list your home for a short sale.  Getting this done up front ensures we get your offer submitted as efficiently and timely as possible.

How long does a Short Sale take?

I've had short sales take as little as 2 months from Listing to Closing while others have taken close to a year.  Usually we expect it to take between 2-4 months.  There are many factors that contribute starting with who the Lender is and how many Lenders have to approve the short sale.  Another factor is the Buyer.  Is the Buyer committed to the purchase of this home?  We strive to do everything we can to ensure you get the best Buyer that will wait out the approval time.  It's important to remember there are many things we can not control, but everything is done to mitigate challenges.

Why does a Short Sale take so long?

Short Sales are different from ordinary sales because there is an added step right in between the time you get an offer acceptable to the Seller and the opening of escrow - that is the approval of the short sale from the Lender or Lenders.  This one additional step is the step everyone hates and the one that takes the majority of the time.  Once an acceptable offer is received, the short sale packet is put together and submitted to all Lenders that hold notes on the house.  Though this is sometimes a single Lender, often times there are two Lenders, and heaven forbid if there are three Lenders.  Each Lender must go through their approval process individually.  While this is going on the Buyer's patience may be tried and sometimes exhausted.  If a Buyer backs out while waiting for the Lenders approval a new offer needs to be submitted.  Some Lenders will take this in stride and continue the process with the new offer, but others require the Lender approval process start over from the beginning.  This gives a glimpse of the fun of a short sale and why it is critical that you choose the right person to help you through this process.

Ok, break it down for me ... what are the steps in a Short Sale and how long should I expect each step to take?

1. Meeting with your Realtor and getting the listing agreements signed - Day 1
2. Collection of homeowners short sale documentation - Day 1
3. MLS Listing entered - Day 1
4. Wait for offer(s) - usually 3-31 days
5. Submit short sale packet with acceptable offer to Lender(s)
6. Wait for Lender approval - 4-10 weeks
7. Get Lender approval
8. Send Agreement Notice to Buyer
9. Open Escrow
10. Inspection period for Buyer - 10 days from Agreement Notice
11. Wait for buyers loan approval and close of escrow - usually 30-45 days from Agreement Notice

* note - if Buyer backs out during #6, new offer needs to be submitted and may require lender approval process to start from beginning adding time to the process.

Why would a bank agree to a Short Sale?

This is actually very simple - money!  Banks are not interested in owning Real Estate.  If they foreclose on a home and it doesn't sell at the auction they own that Real Estate and must go through the process of putting it on the market and selling it themselves.   A Short Sale allows them to get their money without having to own the real estate or manage the process of putting it on the market. 

Do you work with all Banks?  How many Banks have you actually worked with?

Yes, we will work with all banks.  At this time we have worked with over 35 different Lenders, Banks and Servicers.

I've heard that Short Sales rarely close and banks don't approve very many.  Is this true?

Unfortunately when you look at the national average less than 20% of short sales close.  The number of short sales the burst onto the market in the last few years caught many people (not to mention banks) by surprise and being new, the knowledge on how to do them was held by few Realtors and as such were not very successful.  We've been dealing with distressed properties for almost 10 years and fully understand the dynamics of working with lenders on these distressed properties and maintain a success rate near 90%.

How do I get a hold of you to begin the process?

You can call us at 480-227-5893 or email us at brucen1@cox.net.