• What Is A Short Sale?
A short sale occurs when a lender agrees to lower a loan balance at the request of the homeowner. The homeowner sells the property for less than the amount owed, and turns over the proceeds of the sale to the lender in full satisfaction of the debt. The lower payoff has to be negotiated and formally approved by the lender in advance of the sale. The formal negotiation of a short sale approval is conducted through the bank’s loss mitigation department.
  • What Is The Short Sale Process?

Before the lender agrees to lower a loan balance so the homeowner can sell an underwater home, a series of requirements must be fulfilled. The fulfillment of the lender’s requirements, along with the preliminary steps that must be taken by the homeowner and real estate agent is known as The Short Sale Process. For a detailed discussion of The Short Sale Process, please Click here to go to our Short Sale Process Page.

  • What Specifically Is The Bank of America Short Sale Process?
There is virtually no substantive difference between Bank of America’s short sale process and the short sale process of other banks. There is, however, a procedural difference. In 2010 Bank of America introduced an online short sale processing platform called Equator. With the advent of the Equator system, Bank of America short sales are now processed online. Instead of faxing or emailing documents the online process is system driven. Once a short sale is initiated (registered) online, the system generates a series of tasks. Some tasks involve the entry of data and other tasks require the uploading of documents. For a detailed discussion of The Short Sale Process, please Click here to go to our Short Sale Process Page.
  • Do I qualify For A Short Sale?

Each seller’s circumstance is unique and short sale qualification has to be considered on a case-by-case basis. However, as a general proposition you’re likely to qualify for a short sale if the following factors exist: 1) You owe more than the property is worth; and, 2) A significant financial event (aka hardship) has occurred since you obtained the loan that now makes it more difficult to make the payment. There is no category of hardship that’s excluded from consideration as long as there’s a credible impact on the seller’s finances. Examples of significant financial events would be a substantial decrease in household income or a substantial increase in household expenses or upward adjustment in the seller’s mortgage payment. In addition, significant financial events also include a job loss, job transfers, cut backs on hours, decrease in disability or social security payments, divorces, medical expenses, care for ailing parents or children, major diminution of the property’s value (such that cost to cure is impractical), etc.

Note: These are general guidelines and there are exceptions to each of these rules. For example, we’ve closed numerous short sales where there was no financial hardship. Please take a moment to speak with one of our seasoned short sale agents. You may be pleasantly surprised.

  • What Are The Benefits Of A Short Sale?
There are numerous benefits to short selling your home, including, but not limited to:
  • There is no cost to the homeowner
  • Short Sale experts negotiate with the bank on your behalf—you relax
  • The homeowner retains the dignity of selling their home vs. the humiliation of a foreclosure
  • There are no mortgage payments to make during the short sale process, unless you choose to make them (3-12 months)
  • Under certain circumstances another home can be
    purchased immediately (this is much sooner than you can buy after a foreclosure)
  • In most instances homeowners will be able to buy another home in 2 – 3 years (this too is much sooner than you can buy after a foreclosure)
  • There is limited damage to the seller’s credit profile (an entry of “Settled” vs. “Defaulted” or “Foreclosure”)
  • At the close of escrow, the seller will likely qualify for some type of CASH payment, typically $3,000 or more, to help cover their moving expenses
  • The homeowner can typically rent a comparable home for much less than their former mortgage payment
  • Most lenders do not require the seller to be behind on payments
  • CA Senate Bill 458 requires forgiveness on all debt after a short sale in CA (subject to a few exceptions)
  • As opposed to loan modifications, upside down balances can be written off and forgiven now while there is no federal tax liability
  • What Is A BPO On A Short Sale?
A BPO is a Broker’s Price Opinion. The purpose of the BPO is to give the short sale lender an indication of the appropriate listing price. A BPO is generated after a real estate agent or broker reviews and analyzes recent sales of comparable homes in close proximity to the seller’s home.
  • What Is An FHA Short Sale?

An FHA Short Sale occurs when there is a short sale on a home with a loan insured by the Federal Housing Administration (a division of HUD). The vast majority of FHA short sales are processed in accordance with HUD’s Preforeclosure Sales Program (it’s essentially the same short sale process that we’ve reviewed throughout the site and in these FAQs, with a few caveats). Under the Preforeclosure Sales Program, the lender establishes the minimum sales price and underwrites the short sale in advance, then gives the homeowner 120 days to sell the property and suspends all foreclosure activity in the interim. The property must be owner-occupied and at least 31 days delinquent. Note: These are general guidelines. If you have a HUD Insured Mortgage, please contact one of our seasoned short sale listing agents for more details.

  • What Is A Fannie Mae Short Sale?
A Fannie Mae Short Sale is a short sale on a home with a loan that is owned by the Federal National Mortgage Association. The short sale process for a Fannie Mae Loan is essentially the same as the short sale process set forth on this site, both in the FAQs and the Short Sale Process Page.
  • What Is The Short Sale Process For Buyers?
If a buyer wants to buy a short sale listing (a listing on which the lender must approve a short payoff), the process is substantially the same as buying a property that’s a traditional listing – with a few exceptions: 1) On a short sale purchase the closing date is inexact because neither the buyer nor the seller has any control over when the short sale lender approves the short sale; 2) The timeframe for contingency removal does not typically start until after the written short sale approval has been issued; 3) Usually the buyer is not required to place their Earnest Money Deposit into escrow until the written short sale approval is issued by the lender; 4) The buyer, the buyer’s lender, and seller must agree to the terms of the short sale approval; and, 5) All terms of the Purchase Agreement are subject to lender approval, including concessions requested by the buyer.
  • What Is The Short Sale Tax?

Under the IRS Code a Cancellation of Debt is generally treated as taxable income. Assume you owe $200,000 on your home and the current value is $100,000. You ask your bank to approve a short sale so you can sell the home for the $100,000 current value. The lender agrees to the short sale request and the home is sold. In approving the short sale, the lender cancelled $100,000 in debt. The $100,000 in debt forgiveness may be a taxable event. Hence the term “short sale tax” (i.e. a tax resulting from a short sale). Congress addressed this issue by passing the Mortgage Forgiveness Debt Relief Act of 2007. The Mortgage Forgiveness Debt Relief Act allows homeowners to exclude forgiven mortgage debt from gross income (which can save struggling homeowners tens of thousands of dollars). Click here to view the entire text of the Mortgage Forgiveness Debt Relief Act of 2007 and its extension, The American Tax Payer Relief Act of 2012. You may also visit our CA Short Sale Laws Page.

DISCLAIMER: This is general information and is not a substitute for consultation with a qualified tax professional. There are exceptions to the Mortgage Forgiveness Debt Relief Act of 2007. In addition, there may be other tax consequences. Please confer with a qualified tax professional.

  • Can I Get An FHA Loan After A Short Sale?
Yes! In fact, under some circumstances a person who recently completed a short sale is qualified to obtain FHA financing on another home immediately. In other situations the FHA wait time is three (3) years.
  • What Is A Freddie Mac Short Sale?
A Freddie Mac Short Sale is a short sale on a home with a loan that is owned by the Federal Home Loan Mortgage Corporation. The short sale process for a Freddie Mac Loan is essentially the same as the short sale process set forth on this site, both in the FAQs and the Short Sale Process Page.
  • How Does A Short Sale Work?
When a homeowner owes more than their home is worth a request can be made of the lender to approve a short payoff. A formal request has to be made in advance and underwritten by the lender’s loss mitigation department. Upon approval the lender issues a short sale approval letter outlining the terms under which they’ll accept the short payoff. For more information about this topic please click here to go to our Short Sale Process Page.
  • What Is A Strategic Short Sale?
A strategic short sale occurs when a homeowner decides to sell because it’s in the best long term financial interest of his or her family. For example, assume a homeowner is 49 years old and purchased a home in January of 2009 for $850,000. The property has a current value of $520,000 – a devaluation of $330,000 or 39%. When purchasing the property the homeowner obtained 100% financing consisting of an 80% first for $680,000, with a 5.99% interest rate, and a 20% second for $170,000, with a 8.25% interest rate. The payment on the first is $4,072.57. The payment on the second is $1,277.15. Taxes are $885.42 and insurance is $92.47 per month. As such, the total payment is $6,327.61 per month on a property that is $330,000 upside down. Moreover, it’s highly unlikely that the market value will ever see $850,000 again. When the homeowner considers the stark reality, one can easily understand how they’d come to the conclusion that paying $6,327.61 per month on a property that $330,000 upside down is not in their family’s long term financial interest.
  • Can I Get A VA Loan After A Short Sale?
Yes! The general rule is that a buyer seeking VA financing must wait a minimum of two (2) years after they’ve had a short sale. There is an exception that permits a shorter waiting period under some circumstances. If you want additional information about this highly nuanced exception, please complete the inquiry form on this page.
  • What Is A VA Short Sale?
A VA Short Sale occurs when there is a short sale on a home with a loan insured by the Department of Veteran’s Affairs. With a couple of exceptions, the short sale process for a VA Loan is essentially the same as the short sale process set forth on this site, both in the FAQs and the Short Sale Process Page. It should be noted that VA generally requires that the property be free of secondary or other liens, and the cost of the short sale to VA must be less than the cost of foreclosure.
  • What’s The Difference Between Short Sale And Foreclosure?
In a short sale the lender reduces the payoff so that a homeowner who owes more than a home is worth can sell it for market value. The short sale permits voluntary sale of the home with the lender’s permission and is planned, predictable, orderly and dignified. In a foreclosure the lender engages in a legal process to recover the amount owed on the mortgage by forcing the sale of the home used as collateral for the loan. The lender assumes ownership of the property and evicts the occupants. The foreclosure badly damages the homeowner’s credit profile. The short sale usually results in a credit report entry that says “settled” in comparison to a foreclosure that results in a credit report entry that says “defaulted” or “foreclosed”. It’s the dignity of selling versus the humiliation of foreclosure. For more information on this topic please read our Blog Post entitled Short Sale vs. Foreclosure.
  • What’s The Definition Of A Contingent Short Sale?
A Contingent short sale refers to a short sale in which an offer has been accepted by the owner, but is awaiting acceptance by the short sale lender. The consummation of the transaction is contingent on the short sale lender accepting the offer, hence the phrase “CONTINGENT Short Sale.”
  • How Long Does A Short Sale Take?
On average, most short sale lenders are approving short sale requests in 30 – 90 days. There are exceptions.
  • Can A Foreclosure Affect My Security Clearance?
Yes! If you are eligible for access to classified information (i.e. require a security clearance) your credit profile can typically be reviewed at any time—prior to or during employment. Of course the inquiry into your credit profile is made by the appropriate governmental agency. In a 2007 review of the reasons for Security Clearance Denial or Revocation, DOHA (Defense Office of Hearing & Appeals) reports that about 50% of denials involved “financial considerations”. This could mean a number of things, including unexplained affluence, delinquent debt, and yes, foreclosure. Why was there an inability to pay the mortgage and why did the foreclosure occur? Is this evidence of addictive or compulsive behavior? Is there a gambling or a chemical problem? What is the employees state of mind (why undergo the humiliation of a foreclosure when the dignity of a short sale is available). Our experience has been that a short sale is a better option, especially if management is informed of the decision to short sale BEFORE the transaction occurs. If your security clearance may be at risk we strongly urge you to speak to one of our seasoned short sale agents. You’ll benefit from our years of experience.
  • Can I Legally Get Money Back On A Short Sale?
Yes. As ageneral proposition, a short sale lender does not allow the seller to receive any of the proceeds at the close of a short sale—nothing. However, there is one exception. The lender will allow the seller to receive cash back if, and only if, the lender approves the concession. For example, if the lender participates in the federal government’s HAFA program, the seller can receive a relocation incentive up to $3,000. In addition, some lenders, like Bank of America, offer very handsome short sale incentives—as high as $30,000. (Yes, up to $30,000. This is not a misprint).
  • How Much Can I Get Back On A Short Sale?
Yes. As a general proposition, a short sale lender does not allow the seller to receive any of the proceeds at the close of a short sale—nothing. However, there is one exception. The lender will allow the seller to receive cash back if, and only if, the lender approves the concession. For example, if the lender participates in the federal government’s HAFA program, the seller can receive a relocation incentive up to $3,000. In addition, some lenders, like Bank of America, offer very handsome short sale incentives—as high as $30,000. (Yes, up to $30,000. This is not a misprint).
  • What Is The Short Sale Of A House?
A short sale occurs when a lender agrees to accept a discounted payoff to allow an upside down homeowner to sell their home at market value. The discounted payoff has to be negotiated in advance and is arranged in concert with the lender’s loss mitigation department.
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