v3 frequently asked questions

Short SalesFrequently asked

questions

Real Estate Solutions of South Florida, [email protected]

Presented By:Russell IrizarryShort Sale SpecialistMiami-Dade County, FL

www.ShortSaleClinic.com

Disclaimer

The content in this presentation is based upon our research, knowledge and experience. In no way is any information contained herein to be interpreted as legal or tax advice. To be assured of sound legal advice with regards to foreclosure, real estate, bankruptcy or agency laws, please employ the use of a competent legal or tax professional and/or your real estate broker.

Please consult your broker, accountant and attorney, as appropriate, for advice specific to your situation. Although every effort is made to keep this presentation current and relevant, it is your responsibility to seek guidance from qualified professionals in order to keep up with rapidly changing market conditions and periodic changes to the law.


What is a Short Sale?What is a Short Sale?

• A short sale is when a property is sold for less than the mortgage owed on the property.

Property Sale Price: $250,000

Mortgage Balance: $300,000

Short Amount: <$50,000>

Example:

Will the bank come after us for Will the bank come after us for the difference?the difference?

• The bank will have to incur costs if they pursue a deficiency judgment. Unless you have great credit, are not delinquent, or have significant assets, most banks will not. (you can’t drain water from a stone)

Will the bank come after us for Will the bank come after us for the difference?the difference?

• The bank will have to incur costs if they pursue a deficiency judgment. Unless you have great credit, are not delinquent, or have significant assets, most banks will not. (you can’t drain water from a stone)

• A lender usually releases liability of the mortgagee as part of the short sale approval, and issues a 1099 instead (depends on lender).

What is a 1099?What is a 1099?• 1099 is a form used by the IRS to report various

types of income. The bank may report the amount of debt forgiven to the IRS, which you will have to report as income on your tax return if you receive the 1099. (Debt relief = income)

What is a 1099?What is a 1099?• 1099 is a form used by the IRS to report various

types of income. The bank may report the amount of debt forgiven to the IRS, which you will have to report as income on your tax return if you receive the 1099. (Debt relief = income)

• However, in 2007, Congress passed the “Mortgage Forgiveness Debt Relief Act of 2007” which eliminates taxation on debt forgiveness on owner-occupied homes. Applies to debt forgiven between 2007 and 2012.

Will my lender accept a short Will my lender accept a short sale if my payments are sale if my payments are

current?current?• Speak to your lender. In most cases they

will accept a short sale if you can prove a hardship that is not temporary, have explored all of your options (refinance or loan modification) and will soon no longer to be able to make your payments.

Why do I have to provide Why do I have to provide personal financial data?personal financial data?

• In order for the bank to approve your Short Sale, you need to prove your financial hardship. The hardship needs to be justified and documented. The supporting documents required by the lender are 2 recent pay stubs, 2 recent bank statements, 2 most recent tax returns and a financial statement.

Why do I have to provide Why do I have to provide personal financial data?personal financial data?

• In order for the bank to approve your Short Sale, you need to prove your financial hardship. The hardship needs to be justified and documented. The supporting documents required by the lender are 2 recent pay stubs, 2 recent bank statements, 2 most recent tax returns and a financial statement.

• Think of it this way…..the same documents are used for applying for a mortgage, except you are applying to get out of a mortgage

Will a Short Sale destroy my Will a Short Sale destroy my credit?credit?

• Credit score deduction of 150 - 200 points, compared to a foreclosure of 200 - 300 points. A short sale will be less damaging than a foreclosure. You can gain financial stability much sooner.


• Credit score deduction of 150 - 200 points, compared to a foreclosure of 200 - 300 points. A short sale will be less damaging than a foreclosure. You can gain financial stability much sooner, and credit ‘healed’ much faster.

• Depending on lender, the Short Sale may show up as ‘account settled’ on credit report.


• Credit score deduction of 150 - 200 points, compared to a foreclosure of 200 - 300 points. A short sale will be less damaging than a foreclosure. You can gain financial stability much sooner, and credit ‘healed’ much faster.

• Depending on lender, the Short Sale may show up as ‘account settled’ on credit report.

• Per Fannie Mae, you can be eligible again for a mortgage in 2 years, versus 5 years with a foreclosure.

How long does the short sale How long does the short sale process take?process take?

• From submission of the Short Sale package to final approval can take anywhere from 60 to 150 days.

How long does the short sale How long does the short sale process take?process take?

• From submission of the Short Sale package to final approval can take anywhere from 60 to 150 days.

• Package must be 100% complete, and there must be continuous follow-up with the lender. Must call lender 1 –2 times/wk.

Can I short sale the property Can I short sale the property myself?myself?

Yes you can, but there are 2 potential pitfalls:

• 1st - If you don’t have specific knowledge of the market, you will not know how to price your property correctly to generate buyer interest and get the property sold. (continued)

Can I short sale the property Can I short sale the property myself?myself?

• 2nd - When negotiating the offer with your lender, you will need to provide them with a very specific set of documentation, including a very strong justification supporting the offered price. If this is not done correctly, it will very often lead to the offer being declined or simply ignored. You will now have wasted time that you don't have while the lender continues to foreclose on the property.

Can I receive any proceeds Can I receive any proceeds from the sale?from the sale?

• Generally speaking, since you owe more than the property is worth, the lender will not permit you to receive any proceeds from the sale, however….

What is the difference What is the difference between listing with an agent between listing with an agent

and working with you?and working with you?• Two distinct differences: 1st - We submit a

purchase offer to your lender and start the short sale process immediately. (A lender will not consider a short sale without a written contract). If you list your house with an agent, you will need to wait for a buyer, and that could take months. When you call us, we put an option contract on your house immediately and start negotiating with your lender right away.

What is the difference What is the difference between listing with an agent between listing with an agent

and working with you?and working with you?• The 2nd difference is that we are full time

experienced short sale negotiators, and have a track record of successfully closing these types of transactions. This is what we specialize in. Most realtors do not want to negotiate short sales because of the paperwork involved, the lengthy process, and there will be no commission if the short sale is not accepted. The realtors that do know how to close short sales are the exception.

Is there any guarantee that my Is there any guarantee that my lender will accept a short sale?lender will accept a short sale?• We make every effort to work with your lender on

your behalf and get them to accept a short sale. However, we could never never make any guarantees that your lender accept the short sale. All lenders are different and every situation is different. One thing is for sure, they do not want your property back and many times they will accept a short sale if it makes financial sense for them. Our goal is to come up with a win/win offer.

Will this cost me anything?Will this cost me anything?

• We do not charge any fees or commissions.

• Florida Statute 501.1377 was passed Oct 1, 2008 to protect homeowners in foreclosure. No upfront fee, money, property or other form of payment may be accepted by a “foreclosure consultant” until all services are completed

I’m a real estate agent with I’m a real estate agent with short sale clients. Can I call short sale clients. Can I call

you?you?

• Yes, we want to work with realtors. Bring us your clients and you will get a full commission on the sale. We do not charge you any fees.

I’m ready to find out if my I’m ready to find out if my house qualifies for a short house qualifies for a short

sale, what do I need to do?sale, what do I need to do?

• You can call us, email us, or fill out the ‘Contact Us’ fields below, and we will call you within the same business day. If your house qualifies, we will start the process right away.

I’m ready to find out if my I’m ready to find out if my house qualifies, what do I house qualifies, what do I

need to do?need to do?

• You can call us, email us, or fill out the ‘Contact Us’ fields below, and we will call you within the same business day. If your house qualifies, we will start the process right away.

• We no longer do short sales on townhomes or condos. We only do single family homes, minimum 3 bed/2bath.



End of Part IIIAlso see the following videos on the Short Sale process:

Part I – The Foreclosure Process and Homeowner Options

Part II - The Short Sale Process and What We Do

Contact Us today to discuss your options and for further information on the Short Sale Process

www.ShortSaleClinic.com

v3 frequently asked questions

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