STRAIGHT ANSWERS TO TRICKY QUESTIONS
Frequently Asked Questions
1. Should I do something now or should I wait?
If you are on this page, then you already know that you have a problem and the sooner you solve it,
the better of you will be.
2. What if I'm not overleveraged and I have some equity?
If your property has some equity and you wish to sell it, we can still help you. A separate division of our organization handles the purchasing of these homes. Simply call our office with the number at the top of the screen, and we'll route your call through to the correct department.
3. What are my options if I'm facing foreclosure?
If you are facing foreclosure, and you owe close to or more that what you house is worth, then you have 5 options available to you. We know that this may be an emotional time for you and your family, but we suggest that you try and look at the situation from an analytical point of view. Don't let any emotional attachments that you may have to your house, influence you into making a decision that may be pleasing temporarily, but destructive in the long-term.
Also keep in mind that the clock is ticking and it doesn't stop. You need to take action right away so you can stop the foreclosure, protect your credit, and protect your financial well being. All of the options available to you take time to implement and execute. So regardless of which option you choose, the sooner you get started, the more likely you are to see a successful outcome to your situation.
Your 5 Available Options:
Reinstate The Loan
Attempt a Loan Modification
Let The House Go Into Foreclosure
Sell The House Via a Short Sale
4. What is a short sale?
A short sale is a favorable alternative to foreclosure where the lender on a property agrees to accept (as a full payoff) less than what they were originally owed, so that they can avoid the foreclosure process and allow the house to be sold. The bank also absorbs all the costs of sale. (Including realtor commissions, closing costs, escrow fees, etc)
So for example, let's say that a homeowner is unable to make their mortgage payments. Their mortgage balance is $500,000, but the property value has since dropped down to $450,000. With a short sale, the lender will reduce the amount of money they are owed so that it's low enough to allow the property to be sold for $450,000, and to cover the associated costs of sale.
5. Why would a bank do a short sale?
Banks are eager to do short sales because it's in their best interest to do so. They know that if a property is sold at foreclosure auction, it will be sold for much less money than if it was sold via a short sale. Therefore the bank wants to do a short sale because their profit is greater that way.
So why would you want to do a short sale? There are many reasons why this is the most popular choice among homeowners facing foreclosure. On the next page you'll see the top nine benefits of doing a short sale.
6. Do I qualify for a short sale?
If you owe close to or more than what your house is worth, and are having difficulty making your mortgage payment, then you qualify for a short sale. However, the final decision of whether or not your short sale will be approved, is ultimately up to the bank to decide, since the short sale requires the lender to forgive money that is owed to them.
Every lender has their different standards. Certain lenders require that there is some type of hardship that took place, which has caused the loan to become delinquent, whereas other lenders will allow the borrower to short sale their property, even while their payments are still current.
The most important thing to realize, is that a lender will often choose to accept or reject a short sale offer, based on how the offer is presented to them. If the offer is put forth in a professional and persuasive manner, then the offer will most likely be accepted. The key is in knowing what each specific bank is looking for, and that is why it pays to work with an experienced and reputable company.
7. How does a short sale work?
It is important that you understand here how most short sale companies work, and then what makes Short Sales Expedited™ different.
Most short sale companies work as follows: they list your house on the market just like they would any other property for sale. Then when and if they find a buyer, they prepare a short sale package, and submit it to the bank. Then they’ll wait for the bank to respond, and will hopefully try and get the short sale to go through.
The problem here is that with foreclosures, time is of the essence! The number one reason why short sales fail is because a buyer for the property isn’t found in time. Therefore, attempting a short sale this way is risky because you’re leaving too much up to chance.
Here is how the Short Sales Expedited™ process works. After meeting with you, and you elect to become one of our clients, we start the short sale process immediately, we don’t wait for a buyer to be found. We do this by submitting an offer in to the bank right away, with our company acting as the buyer. This way, we can immediately begin to negotiate the short sale, right from day one.
Our short sale success ratio is significantly higher than with other companies because we are short sale negotiators, and are also buyers. We are a well funded company with a large inventory of properties.
Furthermore, we simultaneously begin to market your property from day one. We do this so we can successfully short sale your property regardless of whether we purchase it, or sell it to a 3rd party buyer. We market the property through many different channels, including the multiple listing service, and our inventory of buyers. We network with different companies in the area, and also specialize in executive relocation, so we have a strong database of ready and willing buyers.
And finally, we do not let up until the sale has been completed. Banks are notorious for allowing the short sale process to drag on and on, however we keep the pressure on them throughout the entire process. We know the steps required to complete a short sale, and we expedite you through it. Whereas other companies may simply be ‘reactive’ vs. ‘proactive’ during the process, which will likely result in an unfavorable outcome to you.
8. How long does a short sale take?
The length of time required to complete a short sale will vary depending on the lender that you're working with, as well as with the expertise and experience of your short sale service company. If you're attempting a short sale with a difficult lender, using a novice short sale company, then your short sale could take up to 10 months. If you're working with a straightforward lender, using a seasoned short sale company, then your short sale could take less than 60 days.
The short sale process can be quite detailed and complex. Therefore it is recommended that you do not wait, if a short sale is the right decision for you, then it's advisable that you get started right away. Also, since the short sale process is free to you, give yourself the best chance for success by working with a seasoned company with the 'know how'.
9. Is a short sale better for me than foreclosure?
YES! Our 3 minute intro video addresses this specific question. If you have not yet watched it, you may click here to do so now.
There are many advantages to doing a short sale, refer back to question #6 "The Top 9 Benefits Of Doing A Short Sale" to see the complete list.
However, I can tell you here that the #1 benefit of doing a short sale over foreclosure is that you save your credit. A short sale is reported on your credit report as being an agreed settlement short of full payment, and this is far less detrimental then a foreclosure, which stays on your credit report for 7 long years. Additionally, you're able to purchase another home just 2 years after a short sale, but you must wait 5-7 years after a foreclosure, that's a big difference.
A foreclosure is very damaging because it can drop your credit rating (which is your FICO score) by hundreds of points. This affects things such as future employment, buying a car, renting a home, insurance rates, and most importantly, the interest rates on all of your loans. So it is in your best interest to avoid this if at all possible. Plus, don’t forget that a short sale gives you peace of mind knowing that you’re not going to be evicted, and knowing that you've done the right thing.
10. Are short sales guaranteed to work?
No. No company can guarantee you the outcome of your short sale because the ultimate decision is up to your lender. The lender will evaluate the submitted short sale package and make a determination as to whether to accept, reject or negotiate the offer. Therefore the closest you can come to getting a 'guarantee of success', is to be represented by a company with a proven track record of success.
11. What if the short sale is not accepted?
If our initial short sale package is not accepted, then we continue to negotiate and follow up with the bank until a favorable settlement point can be reached. If the bank is unwavering and will not accept a short sale, then the foreclosure process will continue and the property will likely end up in foreclosure. In that case, you are free to remain in the house and use it as you see fit. Short Sales Expedited™ will absorb all costs of the attempted short sale and there will never be any service charge to you.
12. I have 2 or 3 mortgages on my house, can I still do a short sale?
Yes. In fact, we actually see a higher success rate on short sales where there is more than one mortgage on the property. The reason is that the lenders in 2nd and 3rd position stand a higher chance of getting their loans 'wiped out' at the foreclosure sale. Therefore those lenders are often eager to accepted a discounted payoff as they know that is the best chance they have to recoup any money from the loan.
13. Will I owe any income tax from the short sale?
As we've stated, your lender is allowed by law to write off their losses and issue you a 1099-C, regardless of if the property is sold through a foreclosure or through a short sale. In the past, this money was reported as income to the borrower, and they were responsible for paying taxes on it. However due to recent changes in the tax laws, there are certain cases where the borrower is exempt and this money is non-taxable.
According to the Home Mortgage Forgiveness Debt Relief Act of 2007, (which is till in effect) borrowers are able to exclude up to $2 million of cancelled debt if the mortgage was on their primary residence, and the mortgage was 'purchase money', (meaning that the property was not refinanced).
What if the property was refinanced? Or what if the property was an investment property, and not a primary residence? In that case, the borrower may still be exempt from paying taxes on the cancelled debt if they can claim insolvency. You are insolvent when your total debts are more than the fair market value of your total assets. (Call our office to find out more, including which IRS form your accountant should use to get you this deduction)
If you are not exempt under any of the categories that were mentioned above, then you will most likely be liable for paying taxes on the 1099-C that you receive from the lender. In that case, a short sale is far preferred over a foreclosure because properties typically sell for much less at foreclosure auction, then they do through a short sale. If the property is sold for a lesser amount, then the lenders loss will be more significant, which will result in a larger 1099-C being issued to you.
Remember that it is important for you to consult with your tax professional regarding both your federal and state tax implications.
14. Will my lender come after me for any lost money if I do a short sale?
Our definitive goal is to get a short sale approval in which your lender completely releases you from any liability. Our ability to do this depends on the specific lender which owns your mortgage, as every lender is different in their position on this matter.
15. Should I file for bankruptcy?
If you are considering filing bankruptcy, you must seek out a qualified attorney. This is not legal advice.
The two types of bankruptcy that are available to consumers are Chapter 7 bankruptcy, and Chapter 13 Bankruptcy. A Chapter 7 Bankruptcy is known as a liquidation (all of your debts are wiped out). To do this, first your assets and debts are frozen, and then the court decides which of your assets (home, cars, furniture, business equipment) will be sold in order to pay off those debts.
Chapter 13 bankruptcy is known as a reorganization. In this case, you work with the creditors through the court and you reorganize the debts so that you can repay what you owe over a course of 3 to 5 years.
A bankruptcy may legally stay on your credit for 7-10 years, and has serious financial repercussions that you must consider. Therefore if the main source of your financial distress is your mortgage payment, then you may wish to consider an alternative other than bankruptcy.
16. What is a financial hardship letter?
A financial hardship letter is a letter written to your lender which explains your financial situation, and also clarifies why you are unable to make your mortgage payments. Most of the lenders require the hardship letter to be included with the short sale package.
It is important that this letter is written in your own words, however we will certainly guide you through this task. We know what the banks are looking for in this regard, and we have many sample letters that will guide you in drafting a letter which will be acceptable to the lender.
17. Can I short sale my property if my mortgage payments are current?
Yes. In the past, lenders universally required that a borrower be a minimum of 60 days late before they would consider a short sale. However, that is no longer the case. As it stands today, most major lenders will accept a short sale offer from a borrower that is current on their mortgage payment.
The advantage of keeping your mortgage payment current during the short sale process is that your credit score will not be impacted as much as it otherwise would. The disadvantage of this is that lenders look at these types of short sales as being 'low priority', so the time required to complete the short sale is increased.
18. How much does your service cost? How do you get paid?
Our services are completely free for homeowners. There is absolutely no cost to you when you use Short Sales Expedited™ independent affiliate company for your short sale.
Our services are paid for directly by the lender or through the closing with the new purchaser of the property.
19. Do you profit in anyway if my short sale is unsuccessful?
No. If your short sale is unsuccessful, we in no way realize any profit. In fact, in those situations our company experiences a net loss, due to the fact that we have fixed expenses which go into the preparation and negotiation of your short sale. However, remember that these expenses are fully absorbed by our company, you will never be required to pay for our services, regardless of the outcome.
Therefore you can see that we have a vested interest in seeing that your short sale results in success. We do everything in our power to ensure that your short sale is approved by your lender. We're in it together, and it's either win-win, or no-win.
20. How do I get started?
There is a very high probability that we either work with your lender now or have worked with them in the past. Furthermore, we maintain contacts with most of the major lenders in business today.