Short Sale FAQ
Q. Will I still have to pay property taxes if I do a short sale?
A. Property taxes will always have to be paid as part of any accepted short sale. Whether its you or the lender depends on their policies and the specific agreement you reach while negotiating the short sale.
Q. I owe more than my home is worth and I can't make the payment, do I have to somehow qualify for a short sale?
A. The simple answer is NO. If someone can't make their payment and they are otherwise insolvent they qualify for a short sale. Note: insolvent simply means their total debts are greater than their assets.
Q. Do I have to pay income taxes..I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me..the seller..is this true?
A. It WAS true, now it's not. Consult your Tax Attorney or Qualified CPA. Very recently the tax law was modified and now most people who do a short sale will have no taxes due.
Q. Who pays the commission in a Short Sale?
A. The bank will pay the commission along with all the other usual closing costs.
Q. Do I have to miss a payment to do a Short Sale?Â
A. Every Lender is different and we must first ask the question before you are late any payments.
Q. I have a 2nd mortgage, can I still do a Short sale?
A. Yes, Both of your lenders will have to satisfied in some way to complete the short sale. An experienced Short Sale Agent can assist in negotiating with both lenders.
Q. Homes in my area have dropped in value, will the bank still accept a Short sale?
A. Yes, Lenders will base the selling price on the current market value not the amount of the debt.
Q. Will a Short sale offer stop my foreclosure?
A. No, an accepted offer usally will delay the the process. An experienced Short sale Agent should take the nessasary steps to stop the foreclosure so that the Short sale can be completed.
Do I have to have my home approved by the lender prior to offering it for sale as a short sale?
Will I still have to pay property taxes if I do a short sale?
Who decides if my home should undergo a foreclosure or a short sale?
How long will I have to wait to buy another home?
What will be the effects on my future loans?
Does it affect my employment opportunites?
How does a short sale versus a foreclosure affect the deficiency judgment?
Do I have to have my home 'Approved' by the lender prior to offering it for sale as a short sale?
No. Technically speaking there is no such thing as being a Short Sale Approved. The actual approval only happens after an offer is submitted and accepted.
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Will I still have to pay property taxes if I do a short sale?
Property taxes will always have to be paid as part of any accepted short sale. Whether its you or the lender depends on their policies and the specific agreement you reach while negotiating the short sale.
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Who decides if my home should undergo a foreclosure or a short sale?
In both short sales and foreclosure, the decision is made by your mortgage lender. The most important aspects to getting a lender to agree to a short sale, and saving you the more damaging credit implications of a foreclosure, is to prove that you have no other way to pay the mortgage and that the amount received from a short sale is the fair price of the market. Lenders who believe they can receive more by taking possession of the home in a foreclosure and selling it themselves will not agree to a short sale.
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How long will I have to wait to buy another home?
After a foreclosure, you may end up waiting another 24 to 72 months before a mortgage lender will offer you an interest rate that is acceptable. Most mortgage lenders report that for homeowners who have undergone a previous short sale they may get a reasonable interest rate in less than two years. Fannie Mae guidelines allow a short seller to apply for a new loan immediately if payments were kept current and had no 60-day late payments on their record.
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What will be the effects on my future loans?
For most mortgage lenders you will not be asked to declare or be questioned regarding a short sale on any standard loan application (1003). In regards to foreclosure, you will be asked on any future standard loan application (1003) if you have had a property foreclosed in the last seven years, therefore affecting your rate. Fannie Mae backed mortgages will be available to you following a short sale after two years. Fannie Mae backed mortgages will not be available to you for at least five years if you have lost your home due to a foreclosure.
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Does it affect my employment opportunites?
A short sale does not appear on a credit report and will not challenge your current employment status. In comparison, if you have a foreclosure on your credit report, some employers consider it a reason for termination or reassignment since many run credit checks on employees for certain positions. A foreclosure can be extremely harmful to your chance of being selected for a new job if your credit report is taken into consideration.
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How does a short sale versus a foreclosure affect the deficiency judgment?
If your short sale is handled successfully, the lender may give up the right to pursue a deficiency judgment against you. If the lender does pursue a deficiency judgment against you after a successful short sale, the amount will be considerably lower because your home was sold at a price closer to market value than that of an REO (Real Estate-Owned) sale. In all foreclosures, with the exception of those states without deficiency, the bank has the right to file a deficiency judgment against you. Since your foreclosed home will have to go through the REO process if not sold at auction for a lower sales price, this results in a higher deficiency judgment against you.
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