What is a Short Sale?
A sale of property which includes some frogiveness of debt by the lender under a mortgage or trust deed.

Why would my Lender want a Short Sale opposed to Foreclosing?
No lender wants to foreclose on anyone. It's a lot of work and nobody wins. A short sale often has a better return on investment to the lender than a foreclosure. The average savings a lender sees from a shore sale compared to a foreclosure is $15,000. Not only dew the lender receive this savings, they are also paid on the loan 6 months earlier than in the foreclosure process. This allows them to collect and cash-out earlier than they would in a foreclosure. Plus, lenders spend a great deal of money with attorneys to complete the foreclosure process. Lenders created the short sale process as a foreclosure alternative for those reasons. The incentives to perform a short sale on your property are in place to motivate you to participate.

When should I consider a Short Sale?
Evaluate your current budget situation to determine if you can afford your monthly mortgage payment. If once you’ve realized you can no longer afford it, then contact me immediately. Be proactive: don’t wait until it’s too late for short sale offer.

Why should a Lender/Lien Holder accept less than the outstanding debt?
After a lender appraises the property and learns that it’s worth less than the payoff then they will decide whether it’s worth further legal actions and expenses. The lender will then make a business decision to either foreclose tr to accept a short sale offer.

How long will the Short Sale take?
Once you’ve completed your short sale packet the short sale process can usually take between 2 to 5 months. If your Lender has started the foreclosure process and a foreclosure sale date has been given then we will make an effort to complete it sooner.

What is a Deed ilieu of Foreclosure?
To voluntarily give the property back to the lenders to prevent the lender form bringing foreclosure proceedings.

What is a Deed?
A legal document conveying title to a real property.

What is a Closing Statement HUD?
A form used at closing which lists the financial settlement between buyer and seller, and the costs each must pay.

What is a Deed Of Trust?
An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender ( beneficiary), and re-conveyed upon payment in full.

What is Depreciation?
Decrease in value to real property caused by age, physical deterioration, functional or economic obsolescence.

What is Loss Mitigation?
A process to avoid foreclosure: the lender tries to help a borrower who is in danger of defaulting on their loan.

What is a Loan Modifications?
A loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan to reduce the monthly payments.

Whai is a Forbearance Plan?
A loss mitigation option where the lender prepares a revised repayment plan for the borrower that may include temporary reduction or suspension of monthly loan payments.

What is an Offer?
An indication by a potential buyer of a willingness to purchase a property at a specific price.

What is the difference between a Satisfaction of Lien vs a Release?
A satisfaction is a total release for the debt owed. A release is when a lender releases the lien from the property to allow the home to be sold. (the borrower may still be requed to repay the balance of the debt.)

How does a Short Sale affect my Credit Score opposed to Foreclosure?
A foreclosure can stay on your credit report for up to 10 years and can lower your credit score by 100 points and more. Your credit score is used by credit card companies, auto lenders, insurance companies and many others to determine the rates you’ll required to pay. So, a low credit score is going to cost you money in many other areas of your life for a long time to come. A short sale may not damage your credit score if the lender accepts the offer and doesn’t report negative credit behavior. Typically, any payments missed leading up to a short sale remain on a credit report for seven years.

What Liabiltiy do I have when doing a Short Sale?
The lender has three possible ways to handle the deficiency balance, which is the portion of the mortgage debt no covered by the sale of the home.

- First, the lender can attempt to collect the deficiency balance form the seller after the property has closed.

- Second, the lender may require the seller to sign an unsecured promissory note for the deficiency balance as a condition of agreeing to the short sale.
If the new note is for less that the balance of the original debt, the difference would be considered canceled, or forgiven debt, in which the lender may require to 1099 you.

-Third, the lender may agree to cancel the entire deficiency balance. The amount debt forgiven may be income to the sell and taxable and therefore the lender may require to 1099 you.

WOULD BE IN YOUR BEST INTEREST TO CONSULT A TAX PROFESSIOAL

Recently, according to an MSNBC news article, President Bush announced plans to do away with this 1099 tax penalty on short sales. The IRS Publication 908 also address this issue. In some cases, where the seller is insolvent (incapable of meeting one’s current debts), the 1099 penalty can be avoided all together.

Is the Deficiency Balance Negotiable?
YES. For example a lender may state they don’t “write off” any of the deficiency and that the seller would have to sign for a promissory note for the debt balance. The lender may also state that their hands are tied and this decision came directly for the investor who provides the money for the lender and there is absolutely no negotiation on the amount owed, either pay the deficiency, or they will foreclose. Lenders will LIE to obtain their money. Don’t be fooled that you have no other options: you do.

What is a Deficiency Judgment?
The amount for which the borrower is personally liable on a note and mortgage if the foreclosure sale does not bring enough to cover the debt. Actually the judgment is for the total amount and not for the deficiency, the recovery for the foreclosure sale being deducted from this amount. This will appear on your credit report along with the foreclosure. The lender may be allowed to take further legal action such as garnishing wages to pursue payment based on the law of their state.


ALTHOUGH THERE ARE NO GUARANTEES, A SUCCESSFUL SHORT SLAE SHOULD ELIMINATE A DEFICIENCY JUDGMENT, MINIMIZE YOUR TAX LIABLITY AND DEEP FORECLOSURE OFF YOU CREDIT.