A: It is much more cost effective for a bank to do a short sale rather than foreclose on a home. Banks are not interested in owning real estate. Banks make their money from receiving monthly mortgage payments. While banks will take a loss during a short sale, they can often minimize their loss by as much as 10-20% over a foreclosure.

A: There are 3 main qualifications for a short sale candidate:

1. A good candidate is a homeowner who is currently behind or may fall behind on their mortgage payment(s) and is unable to keep up with all of their monthly obligations. Having a financial hardship is an important part of the bank’s review process. Some reasons for falling behind on your mortgage payment(s) may include sudden change in monthly household income, loss of job, business failure, divorce, sudden medical obligations, increased monthly payment, forced job relocation, military service, and more. The ‘hardship’ must fit a list of criteria and be documentable.

2. A good candidate also has no equity in their home. They are not able to sell their home and pay off all of the outstanding loans that are secured against their property.  Remember, Home Equity Lines of Credit (HELOC) are secured by the property and would need to be satisfied, also.

3. A good candidate must also be insolvent, meaning they have no other significant assets that can be used to pay the difference.

A: There are several stages that are involved with the short sale process...

1. The first stage requires working with you, the homeowner, to get all of the required documentation that your lender will require us to send them.  We will also need copies of all documents sent to you by your mortgage company.

2. The second stage involves us preparing the listing paperwork and scheduling an appointment with you to see your home and prepare it to be listed for sale.

3. The third stage entails us aggressively marketing your home for sale and producing a willing, ready, and able buyer. 

4. The fourth stage is the actual presentation of the offer to your bank. This is where our expertise in negotiating short sales takes place. The actual negotiation/approval process takes between 30-60 days from the date the offer is presented to the lender to the date of the short sale approval. In most cases, 45-90 phone calls and faxes back and forth between the lender and our team are required.

A: You may have heard, "Don't do a short sale because you will get a 1099 and have to pay taxes on the difference between what you owed on your home and what you sold it for or the amount the bank wrote off." This is true, but it isn't the whole story...

If you do a short sale you will receive a 1099 from your mortgage company. This 1099 is called a "1099-C". The thing that most people don't know or don't tell you is that with a foreclosure you will also get a 1099. In the case of a foreclosure, it is called a "1099-A".

So what's the difference between a 1099-C and a 1099-A? The "C" stands for "Cancellation of Debt" and the "A" stands for "Acquisition or Abandonment of Secured Property". It is important to know while there are many differences, the tax consequences for the "C" and the "A" are the same. However, if this short sale involves your Primary Residence, you may not be required to pay taxes on the income as shown on the 1099-C, but don't just assume that you won't have to. Due to the current state of the real estate market, tax laws are being revised in this area constantly.  Before making your final decision, first consult your CPA or tax preparer. While we are very good at successfully closing short sales, we are not tax experts. Please consult a professional CPA or tax preparer before beginning the short sale process.

One more thing you should know is that in approximately 99% of the cases, the amount of the loss at a foreclosure is greater than that of a short sale. If you are going to receive a 1099 in either case, it is in your best interest to do a short sale instead of allowing your property to be sold for less at foreclosure or as an REO (Real Estate or Bank Owned Property). Now that you know this, don't allow rumors or incorrect information influence an important decision in your life. Losing your home to foreclosure is always the last resort and you should seriously look at all of your options before letting your home go to foreclosure.

A: This question is asked very frequently and has many different variables involved. The first thing to keep in mind is that the moment you are 30+ days behind on your mortgage payment, your bank has the right to report to all of the credit bureaus that you are 30 days behind on your payments. When a late payment is reported to the three major credit bureaus, it does have a direct affect on your credit. After going through a short sale or a foreclosure, most people have multiple 30, 60, 90+ day late payments reporting on their credit report.

When the actual short sale is completed, most banks will report to your credit report that your account was "paid in full for less than the full amount". Your credit report may also be marked as "settled". It is important to keep in mind that each lender has a different way of reporting that a short sale was done, but this is the most common language that is seen. Once a foreclosure is filed, it will show in the public records portion of your credit report, as well as in the credit portion. In reality, a foreclosure notation will probably show twice on a credit report.

A: We have a list of items we will need from you before we list your property for sale and the actual documents for you to complete and sign.  The first thing we will need is the authorization form. This form gives the bank your permission to speak to us.

Possibly one of the most important items we must include with the short sale package is a hardship letter. This letter must give an explanation as to why you are not able to continue to make the payments on the property. The package of documents we give you provides an example of a hardship letter.

A: Cost - It’s frequently less expensive to buy a short sale property than a bank owned property.  If you wait for the lender to foreclose there are more costs such as unpaid property taxes, HOA dues, property insurance, mortgage insurance premiums, property maintenance costs, attorneys fees, etc and the final sales price may need to include some of these costs.  Condition: Usually a bank owned property has been abandoned by the former homeowner and has sat vacant for months.  Unfortunately vandalism, theft and months of sitting vacant add additional unexpected costs to the new owner.