Frequently Asked Questions Regarding Short Sales

20130402-220332.jpgQ: What is a short sale?
A: A Short Sale is a property that sells for less than the balance owing on the mortgage. If there is a mortgage balance that is greater than the market value of the home, that property is a short sale. A short sale is a seller’s best option to avoid foreclosure and must be approved by their lender.

Q: What is the advantage of agreeing to a short sale vs letting your property go to foreclosure?
A1: If you and your lender agree to a short sale settlement and the property is your homesteaded primary residence, the bank is basically ‘settling’ the debt at the agreed sales price. (Refer to Debt Forgiveness Act of 2007)
A2: If you choose to let the bank foreclose on the property, the bank can also attempt to recoup their loss. They can do this by filing a Form 1099 for the difference between the sales price and the amount owed; they can file a judgment against you for up to 10 years; they can turn the file over to a collection agency.

Q: What is required to sell my property as a short sale?
A: A short sale definitely requires cooperation from all parties involved. As a seller, you will have to provide 2 years of tax returns, 2 months of bank statements, 2 months of pay stubs, and be willing to write a short paragraph describing your hardship, explaining why you cannot make your mortgage payment. Keep this ‘hardship letter’ short and to the point. You will then want to prepare the house for showing to prospective buyers.

Q: What happens after a contract is signed?
A: This is when patience becomes a critical part of the process for the sellers, buyers and agents. All the required items are submitted to the bank’s asset management department for review. The entire process could take several months before getting final approval. This is also the time when an experienced short sale team can make a difference. Our team has vast experience in all facets of the short sale process.

Q: Does the bank automatically approve these offers at the contract price?
A: Not always. Just like in a traditional sale, the bank has options. They can approve the offer as submitted, make a counter offer, or even decline the offer altogether. They typically will approve or counter offer if the offer is fair and can be justified by market conditions.

Q: What if I have more than one mortgage?
A: If you have a first mortgage, a second mortgage, and a home equity loan, we will submit a short sale package to all three lenders and each will have to approve the sale.

Q: How much can I make if I sell my property as a Short Sale?
A: There is $0.00 paid to the seller of a short sale. Since the bank is agreeing to take less than the amount owed, all proceeds go to the bank.

Q: What if I owe back payments to my Association?
A: It is always recommended that you keep up with your association dues. If the amount owed is a very large amount, the bank may in fact refuse to pay and it could be reason to deny the sale. Remember, the bank is not obligated to accept a short sale payoff!!

Q: What does it cost to list my property with The Allegiance Team?
A: The cost to you is $0.00. That’s right…. Zero. Our commission is derived from the sale of the property and is paid by the proceeds to the bank. We work with an attorney to negotiate the sale with your lender(s) to ensure the lender offers a full release.

Our heartfelt thanks go to Ginny for her professionalism, knowledge, patience and support through the buying process.  There were a few stressful moments but it was calming to know that we were being guided by a true real estate professional who had our best interest at heart.  Her attention to detail is impeccable and she always communicates in a timely fashion.  There is no doubt that we will work with Ginny again with our future real estate investments. 

- Kathy and Daniel Torres

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