If you need to sell your home due to financial problems or the risk of Foreclosure, a Short Sale might be an excellent option for you and we can help!
What is a short sale?
Over 10 million homeowners are upside down with their mortgages, which means they owe more than their home's value. A short sale, sometimes referred to as a "pay off" or "short pay", is a transaction authorized by the mortgage company / lender in which they agree to the sale of the home for less than the Seller owes on the mortgage. As a part of the Short Sale, the mortgage company / lender "usually" agrees to write-off / forgive the balance difference in order to avoid greater losses of their mortgage loan that a foreclosure would cause. In order for the Seller to be pre-qualified for a short sale the Seller must be experiencing a financial hardship that meets the lender's criteria.
What is considered a "financial hardship"?
An example of "financial hardships" includes, but is not limited to some of the following: lost job / employment, excessive debt, divorce, reduced income, increase of mortgage payment, employment relocation, illness, medical bills, military service, etc.
Why would a lender approve a Short Sale? How does the lender benefit?
A foreclosure is ONE OF THE LAST THINGS A LENDER WANTS since foreclosures take months and months to complete. Foreclosures are VERY expensive and by the time the lender obtains possession of the property (via foreclosure) it will take them considerable time to get the property back on the market AND obtain a buyer. During all of this time, the lender's money is tied up in the property incurring attorney fees, property liability, etc. You can be assured, the last thing a lender wants is to own property. Mortgage companies / lenders are finance companies. They do NOT want to be in the business of owning real estate.
What is the tax liability to a Seller for a Short Sale?
The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualifies for the relief. Be sure to refer to www.irs.gov AND consult a tax advisor for details if you qualify.
The Mortgage Debt Relief Act of 2007 provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.
More information, including detailed examples can be found on the IRS' website www.irs.govand read Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17 in addition to consulting your professional tax adviser.
What is the cost to the Seller imposed by the Lender to do a Short Sale?
Nothing! Call Dynamic Duo & Associates today at (703) 680-9551 to learn more!
How much time is required to process a Short Sale?
Once the required Short Sale documents and a valid offer have been received by your mortgage company, a Short Sale transaction can require as little time as a few weeks or as much as several months to obtain the APPROVAL of a Short Sale from the lien holder(s) of on the property (e.g. bank / lender providing the mortgage). However on average the process takes approximately 90 days from the date the lender receives a contract. It is especially important for buyers to be very clear of the potential "approval" time period the mortgage company will require BEFORE they submit an offer to purchase a "Short Sale" property. Patience is key, some buyers have that luxury while other buyers may not. Full disclosure is critical at all times.
Is it really possible for me (the Seller) to obtain approval for a Short Sale?
Yes. If you qualify and all of your documentation is in order (and the details regarding your financial hardship are compelling and well documented), you have an EXCELLENT chance of being approved. We have been very successful working with mortgage companies to obtain approval for short sales for our sellers. However, please remember that approval of a short sale is determined by your lender.
What impact does a Short Sale have on my credit?
Typically a short sale has a negative impact on your credit score or credit rating. Please keep in mind that your primary lender or 1st mortgagor could report a negative rating for up to 2 years. While a 2nd can stay on your credit for up to 7 years unless a settlement is agreed upon.
How do I get started with a Short Sale?
You can start by calling the Dynamic Duo & Associates today at 703-680-9551 or emailing us at firstname.lastname@example.org to schedule an appointment.