Frequently Asked Questions

Q. What is a short sale?

A- A short sale in real estate occurs when the outstanding obligations (loans) and the cost of selling are greater than what the property can be sold for.  Short sale is an alternative to avoid foreclosure on your home.  

Q. Do I qualify for a short sale?

A- Lenders vary in their requirements. Most lenders require the following: 

• 1. You are unable to pay your monthly mortgage or will be in the near future.
• 2. You have a qualifying hardship. Examples that qualify are divorce, loss of a job or income, medical, excessive travel time to a job, relocation, family death, or other legitimate hardships.
• 3. You have no other major assets. Lenders who see homeowners with large bank accounts or assets are less likely to cooperate on a short sale.

Q. How long does it take to do a short sale?

A-The typical sale takes 2-6 months from start to finish. Timeframes vary with each lender but we are finding that constant communication with them tends to speed up process or at least keep it from stalling. 

Q. How do I begin a short sale?

A- Call our office to get started. Most lenders prefer a short sale than to foreclose as foreclosure is timely and costly to the lender. Next, fully complete your paperwork as listed on "Seller Homework and Documentation Needed". Once you have completed all documentation we will take it from there.  

Q. When should I start the short sale process?

A - As soon as you can. Short selling is an alternative to foreclosure. If you have no other options then be ready to begin your short sale process quickly. Short sales are time sensitive and the more time allotted the more successful the transaction will be.

Q. Do I have to pay Realtor commissions out of my pocket?

A - In a Short Sale transaction you, as the seller, you do not pay, out of pocket, the Realtor commissions or any of the closing costs. Basically the fees and costs are taken off the top of the buyers offer to purchase leaving the bank with a NET proceed amount. Please note that there is one possible exception - the banks may not pay for any unpaid HOA fees, assessments or fines.    

Q. Do you charge an upfront fee for taking my short sale listing?

A- No. Some real estate agents or companies charge an upfront processing or retainer fee from the seller before beginning a short sale. In addition, some real estate agents require you to pay a third party negotiator firm to actually negotiate your short sale. We do not, we process and coordinate the negotiations between you and the bank in house alleviating any costs and fees paid by you at the start of the listing. If you choose to use a third party negotiator then you certainly have that right at your expense.

Q. Should I continue to pay my HOA fees?

A- We strongly recommend that you do. HOA fees are an owner's personal obligation. If they are not paid, it can result in credit damage, lawsuits, or other collection efforts. Some lenders will not   pay for back HOA fees on a short sale. If your lender is one of those lenders you will have to pay those fees, fines and assessments to close on the property.  

Q. Can I short sale if I am doing a loan modification or filing bankruptcy?

A- No. Both of these situations will halt a short sale. Loan modifications should be done before a short sale if you wish to keep the home. If the loan modification fails or does not resolve your ability to retain the home, then you should begin a short sale immediately thereafter. If you are filing bankruptcy, you should receive legal counsel on whether to do that before or after completing a short sale. No lender will process a short sale if you file for bankruptcy during the short sale process.

Q. Do all short sales get approved?

A - No. We cannot guarantee that we can close every short sale. Sometimes the banks simply will not cooperate, have inflated ideas about market value, or will not halt a trustee's sale. Also, if you have multiple liens on your properties, junior lien holders or PMI companies may not be willing to come to agreeable terms with you to proceed with a short sale. Remember, most banks want to short sale so many do work out and get approved. 

Q. Can the lender pursue me for the amount forgiven?

A- This is a very complex question, and one best answered by a real estate attorney familiar with Arizona's Anti-Deficiency Statutes. Certain loans are protected in foreclosure where a lender will have no recourse. However, not all loans have that protection and the lender may have recourse after you whether you short sale or foreclose. A short sale, at a minimum, may give you the opportunity to get that debt entirely forgiven or negotiate a percentage of the debt to be repaid at an affordable repayment plan. Please consult an attorney regarding your specific situation.

Q. Can a lender ask me to sign a note or pay cash to settle a debt?

A- Yes. They can ask, but asking does not compel the owner to agree. In some instances where loans do not have anti-deficiency protection it would be better to settle the debt than to gamble on being pursued for a deficiency judgment. This is the scenario that we encourage you to explore with legal counsel before beginning this processes, as well as at point of the lender issued "Agreement Notice". If you cannot agree to the lender's terms then you are not obligated to complete the short sale.   

Q. Can I sell my home to a relative?

A- In my experience, most likely not. Most lenders will ask all parties to sign an "Affidavit of Arm's Length Transaction". This generally states that the parties cannot be a family member, business associate, or share a business interest.  

Q. Can I sell personal property like appliances and furniture to the buyer at closing?

A- No. The lender does not allow any cash back to the seller at closing. Lenders consider any money the buyer gives you to be cash back even if it is for appliances or personal property such as furniture. This is a big no-no and is considered mortgage fraud.

Q. Do I have to consult with an attorney for you to take my short sale listing?

A- No, but I STRONGLY recommend it. Some real estate agents mandate you consult with an attorney or they will not list your home for a short sale. We HIGHLY encourage you do so, but it is not a requirement. If we feel you are a high risk short sale and you choose not to seek legal counsel we may opt to decline the short sale listing.  Be smart and proactive. Seek legal and tax counsel. Protect yourself and make an informed decision for your future.

Q. Are there tax ramifications in doing a short sale?

A- Possibly. When you complete a short sale, you will receive a 1099-C which stands for "Cancellation of debt". On a foreclosure you will also receive a 1099-A which stands for "Abandonment of secured property". The Mortgage Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Not all types of mortgages are covered so you need to speak to a tax professional to determine your liability. This provision applies to debt forgiven in calendar years 2007 through 2012. For more information go directly to the IRS website at www.IRS.gov and do a keyword search of "Mortgage Debt Relief" to view their entire FAQ on the subject. Investors need to be aware that this Act covers principal residences only. However, whether foreclosing or short selling - the tax issue will need to be addressed by the investor. Generally you should try to minimize the loss of the lender to minimize the taxable amount. As always, we recommend that you seek professional tax advice before any decision to begin a short sale or before foreclosure. 

Q. Are there any credit ramifications in doing a short sale?

 A - Anytime you are 30-days or more behind on an account it will adversely impact your credit score if that account is listed on a your credit report. This question is difficult to answer as a variety of factors compose a credit score. Here is what we can tell you, the initial damage to your credit comes in the form of late payments. If you go 30+ days behind on your mortgage payment, your bank has the right to report that to all of the credit bureau's. The benefit of a short sale is the ability for FUTURE borrowing and the timeframes you have to wait to repurchase another home. In addition, a short sale will show the account was "settled" or "paid for less than full amount" on the credit report. We cannot guarantee how your lender will report it but those statements have been the most common.

Q. I am behind on my payments. How long until the bank forecloses?

A - Each lender varies on when they file a default notice to foreclose. Individual factors determine when the lender files a notice of default. Typically in Arizona a homeowner has to be 90 days or more behind before a lender will file. Some lenders take up to 12 months because they are trying to work with the homeowner to come current, modify their loan, or give them time to short sale the home. If you have a foreclosure date, you can still short sale your home. Typically, a bank will postpone a foreclosure if they have an offer to review for a potential short sale. We have personally stopped the foreclosure process five days out from auction date. However, waiting that long is not recommended. The risk of it actually foreclosing is HIGH.