Short Sale SellersShort Sale FAQs
Here are some commonly asked questions when dealing with real estate short sales:
1. What is a short sale?
A short sale is a transaction in which the seller’s lender agrees to accept a payoff on the loan that is less than the balance due. The lender is essentially absorbing the loss on the loan(s) and will in most cases agree to pay the costs of the sales, such as real estate commissions.
2. How long does the average short sale take?
It can take anywhere from 28 days to 6 months for a lender to receive a final sign off offer from the buyer and seller. The process frequently will move slowly. Many lenders are looking to improve their speed on this procedure.
3. If a short sale transaction takes as long as 6 months, why is it called “short”?
Clearly not a “short” sale due to the time needed to complete the process, the term short sale is due to price positioning. For a short sale to be completely successfully, the homeowner must establish they are eligible for a short sale by providing supporting documentation such as W-2 forms, bank statements, tax returns and other financial documents.
4. Why would a lender want to do a short sale?
There are quite a number of reasons why a lender would agree to do a short sale. Foreclosures can take time and a lot of money for the lender. The expense of doing a foreclosure: repairs, maintenance, security, eviction, expenses, HOA fees, property taxes and utilities can add up. It’s due to these factors that lenders will choose to do a short sale.
5. Is a short sale an option if the foreclosure has already happened on the property?
Nope. Once the lender has completed the foreclosure process, a short sale is no longer an option for the seller. It is quite vital for the home seller to understand the importance of acting quickly and having early communication with the lender to keep all options open. Speak to the lender and let them know that you are having financial difficulties. If you want to retain the ownership of your home, you may be able to work out other alternatives other than foreclosure.
6. I have a 2nd mortgage, does this make me ineligible for a short sale?
In most cases a short sale can be achieved on a property with multiple loans. Depending on the amount of the loss to the 2nd loan holder, the short sale may be doable under certain circumstances. Requests for short sale consideration must be sent to both lenders.
7. Once you have an offer on the short sale property, what happens next?
Your Realtor will help you with negotiating the best price and terms. Once the negotiations are complete, the offer and all the short sale supporting documentation will be sent to the lender’s loss mitigation department. It is very important for the Realtor to continuously keep in in touch with the bank during this next step.
8. Will I have to pay capital gains taxes if I sell via a short sale?
A short sale will not have bearing on your capital gains taxes. Although, there may be other tax liabilities.
9. Will a short sale affect my credit score?
Yes. Your tax adviser could address you with the specifice issues to your situation.
10. I want to purchase a short sale, but where do I start?
Choose a Realtor who knows how to handle short sales and can work through an difficulties that arise.
11. When purchasing a short sale, do I have to pay escrow fees?
Typically a buyer and seller pay their own fees. In short sales, the lenders may request that certain fees be paid by the buyer as the condition of the sale. Some costs may include: funds owed to the 2nd loan holder, closing costs, delinquent property taxes and HOA dues.
12. How do I find out that I’m eligible for a short sale?
There are many options prior to doing a short sale: loan modifications/refinance, deed in lieu of foreclosure, foreclosure and bankruptcy. There are a number of counselors available to help homeowners decide on the pros and cons of each decision. The complete list of counselors can be found on http://www.hud.gov.