Short Sale FAQs Information
Short sale refers to the sale of real property for an amount less than the amount owned on the property. In the short sale scenario, the bank agrees to accept less than the full balance owed on the debt, and usually "forgives" all or a large portion of the difference.
How will the Short Sale affect your credit? Short Sales are still relatively new concept. Banks have the option of submitting the short sale to the credit bureau as " Paid in Full" or " Settled for less than owed". There is no evidence to support that a short sale will lower your credit score. Not making payments on your loan is what lowers your score, not the short sale process. A short sale is unlike a foreclosure or bankruptcy, the lender is simply allowing you to pay less than you owe.
If you are currently behind on your mortgage payments or facing foreclosure, the short sale will help your credit. How? Once you are approved for the short sale, all collection activity will stop and you will avoid foreclosure!
Who benefits from the Short Sale? Lenders,Realtors, Mortgagors get the majority of their money back without having to go through the expense of foreclosing. You get the relief you need and are able to sell your property dignity. Realtors can facilitate the transaction and receive a commission form the sale of the property. Win-Win for everyone.
Why would banks forgive the difference? When faced with the option of taking the property back by foreclosure or short sale, the short sale option is a much wiser business decision for the bank.
This sounds too good to be true! The short sale makes more financial sense for the banks, and mortgage companies they are in the Lending business not in the Real Estate business. The last thing they want is to take the property back through foreclosure.
How long does it take? Short Sale approval can take 60 days or longer.
What if my home is already in foreclosure? Your foreclosure usually will be suspended in during short sale process. That's why it is VERY important you contact me immediately!
I am still confused, should I short sale, do a loan mod or just let them foreclose? Where can I go for more information? Go to www.knowyouroptions.com it is a website provided by Fannie Mae to help consumers be informed on their choices in these trying times.
Can Fha, Conventional and VA loans receive a short sale? Yes in most all cases.
Why don't I just let the bank foreclose? NO! The foreclosure is a legal process and very stressful for the homeowner, never knowing when they will have to move. The impact on your credit is much more damaging and longer to repair on a foreclosure than a short sale. In most cases the impact on your credit score is only two years for a short sale as opposed to seven years on a foreclosure. It involves attorneys and it cost Money! It makes more sense for the bank to take less money owed than taking the property back.
Can I rent out my house while I wait for the short sale to go through? I do not recommend renting out the property during the process. Banks are not sympathetic to sellers who receive rent and do not make mortgage payments! Also the are laws to protect renters and the house will be much harder to show and sell!
Will I have to pay a Real Estate commission? NO, the banks will pay all the costs of selling.
Will I be taxed or owe any money on the debt forgiven? In 2007 the U.S. Congress passed the Mortgage Debt Forgiveness Relief Act and it is in effect until 2012. Borrowers no longer pay taxes on the debt forgiven on their primary residence. The rules are different for investment property. For more information go to http://www.irs.gov
I hope this information has helped you, feel free to give me a call 818.986.4129 or email me at linda@lindacarreon.com at anytime I may be of Real Estate service to you.
Thank you,
Linda
