FAQ’s
Here are some Frequently Asked Questions (FAQ’s) pertaining to Short Sales that may help you as you consider all your options.
1. What is a Short Sale?
A short sale is the process by which homeowners can sell their home for less money than they actually owe on the mortgage(s). This is accomplished by getting proper documentation to the lender(s) to help them to agree to reduce the mortgage balance to allow the sale. The mortgage lender(s) will actually take a loss on the mortgage if the the Short Sale is Approved and sometimes that loss is quite substantial…so you can see why it takes some doing.
2. How will we know what the bank will accept for the property?
Banks have a variety of ways of determining what let will accept to release their security on the home for. As a part of working with our team we have access to tools used inside the banking world by what are known as “Loss Mitigators”. It is a fascinating process and there are no real set rules but we can usually tell you after an initial meeting with one of our staff how things are likely to be reviewed on your home.
3. How do I know if my situation is right for a Short Sale and if it is even an option for me and my family?
In many cases a home that is a likely candidate for a Short Sale in Oregon will need to be in the process of being foreclosed. Now though we see many people negotiating Short Sales while they are living in the homes and not in foreclosure yet. People want to do the right thing but this is a very logical and reasonable option for many people. You should at least look at a Short Sale as a possibility.
In most short sales the homeowner typically has no equity or even negative equity in the home. They are what people refer to as “Underwater” where the total balance owed to the lender is equal to, or greater than, the price at which the house can be sold.
One of the issues as well is that the bank must believe that the homeowner hase some type of financial “hardship” which is preventing them from staying current on their mortgage.
4. Why do a Short Sale? Is there really any benefit?
You bet there is benefit. Big Benefit! Number one a short sale relieves the stress of being in foreclosure.It will help the homeowner to get rid of their big mortgage payment and move on with their lives. A short sale in Oregon on a home will allow you to stop a foreclosure proceeding if it succeeds. Getting this stress off of your home and family is a major victory in and of itself.
On the credit side, a short sale is a much better option then the choice of going to foreclosure in most cases. If you have late payments and a foreclosure filing your credit is in serious jeopardy anyway. A completed foreclosure generally will do much more damage than a short sale agreed to by a lender. The other option of a bankruptcy significantly damages your credit score as well.
5. What type of Properties qualify for a Short Sale? Is it just my home? We have rentals that are in trouble so what about those?
Any property can qualify. Essential to the success of negotiating a Short Sale here in Oregon is the element of ”hardship”. Given the economy today and the situation in most communities that should not be that hard to establish. Before you even look at this option remember to consult your tax advisor..
6. There are all sorts of loans on property. Are Short Sales limited to a certain type of loan?
That is a great question. You might have a risk of a deficiency judgement or a lawsuit on a loan contract, as opposed to judicial foreclosure. This is where our team of legitimate consultants will get involved. As a part of our initial meeting and consultation we lay all the cards on the table. This is a team effort and that includes you too!
7. We are being foreclosed on right now in Beaverton, Oregon. Can a Short Sale help us?
In our experience the answer is usually “Yes”; this is an option you want to explore. Every case is different of course and so we have to just dig in and meet. There is No Obligation and we will not charge you. WE OFFER A FREE CONFIDENTIAL CONSULT! The important factors in relation to a short sale are:
a. Your Property in Foreclosure or Default
b. You are Experiencing a Personal financial hardship
c. You have no equity in your property
d. You have at least 60 days until your possible eviction date
e. The value of the home has dropped at to a level at or below the loan amount
There are a lot of other Criteria and you will likely need to meet with your attorney or Tax professional as these things present them-self.
8. What if my mortgage is an FHA, HUD or VA mortgage?
We have negotiated Short Sales on a number of different types of loans but they are all different and have their own specific criteria. So the consultation is an important part of this.
9. Do we have to Short Sell? There must be other options aren’t there?
Well of Course your don’t. Here are some of the other options you have.
a. Cure your mortgage default by making all your payments and penalties.
b. Attempt a loan modification that adjusts the terms of your existing loan. This is much talked about but in our experience this is not something most banks seem to be doing.
c. Refinance your mortgage with another loan.
d. Hire one of our team of Top Oregon Real Estate Brokers to sell your home and pay off the loans.
e. Attempt to get your lender to accept a deed in lieu of a foreclosure.
f. File for bankruptcy protection and reorganize.
g. Some of our clients rent their homes and pay a negative amount every month as another option to try and preserve their property and credit.
There are a lot of options. Knowing which one is right for you is a matter of finding the right fit.
10. What is “financial hardship” and why is it so important that I have that in order to get a Short Sale approved?
Your bank is not going to just roll over. They need to see a Financial situation has arisen for you that gives them a good reason to work with you. They are not in the business of owning homes and believe us… they do not want any homes back. So establishing that you have a reduced income, increased bills, a change at work, a health issue….. you get the picture…. this is all crucial to get their attention and cooperation.
If they see their is an issue they will play ball. At that point their job is to determine if they can get one penny more then going through foreclosure. If they can we can usually get them to work with us. This is not an emotional thing for them… it clearly is for you… but they deal is debits and credits and dollars and sense.
Please understand if you want to just dump the home back to the bank because its value is gone you will have a hard time. Usually however by consulting with one of our Oregon Short Sale Brokers or consultants we can determine some options that may work for you. Time is always critical.
11. Will the bank Own my home after a Short Sale?
No we will find you a new buyer and they will own the home after the Short Sale is done. The actual sale is not much different then a normal sale. It is just conditioned upon getting the lenders to agree to agree to sign off on the sale.
12. Who will pay my back property taxes when I do a short sale?
This is a lien on the property and will be paid at closing. Many times the bank will have to agree to this money being paid at closing before they are paid. Most of our clients do not pay this and the other closing fees as they are cash poor.
13. Where all do you sell?
Well our team sells all over the Tri-County area in and around Portland, Oregon. We work Multnomah, Washington, and Clackamas County and have and will work in Clatsop, Yamhill, Marion, Polk, and Columbia County as well. We handle short sales all over these areas.
Good news for you is that our team is adding professionals that are experienced Oregon Short Sale Real Estate Brokers as well as other professionals all over the State.
14. Do you handle duplexes, apartment buildings, condos, or commercial property?
Yes. We have Experience in all of these areas including Land and New Construction…second Homes..investments..Commercial. There is very little that we have not handled in the 25 plus years we have sold and managed projects here in Oregon.
15. My home is already listed for sale on the MLS, but isn’t selling; can I still do a short sale? Can I work with your Team?
Well we really can not work with you unless we are in a Brokerage arrangement. If we are representing the Buyer of your home we can. If you are listing then definitely use us and we will provide you with the best real estate service.
16. We have a great home and yet people are making such Low Offers… it is insulting. Why is that and why should we agree to that?
Of course we all have an emotional attachment to our homes. It is very important to remember a few things. First, the seller in a short sale can never receive any money in the transaction. It should therefore be of little concern what price is offered as long as the short sale is done. The only real exception is when the seller has tax liability concerns. (If there is tax liability, a lower sale price means a larger mortgage relief and a greater tax liability.) Otherwise, the price should not matter to the seller. Get professional tax advice about this situation.
The important factor in a short sale is whether the lender will accept the price offered. Lenders often accept prices for short sales which may be surprising to normal homeowners or Realtors. Discounts of 20-30% are no longer uncommon. This can happens for several reasons:
1. Sellers are often in denial about how bad the market really is for housing and therefore, how far the value has declined.
2. Lenders don’t like the foreclosure process any more than homeowners do. Lenders incur substantial costs during a foreclosure process that can last more than 12 months. They have attorney fees, filing fees, publication fees, lost interest on the money that is tied up, property taxes, insurance, maintenance costs, as well as the potential for vandalism of a vacant home. This is all BEFORE having to try to sell the home as a bank-owned (REO) property and pay sales commissions. A short sale is a way to avoid some or all of these costs. The Lender may stand to loose $80,000 on a sale and so we can often negotiate the sale at a great price and the bank agrees as they are getting more. Lenders in second and third position will really deal in these cases.
17. But if I am under-water and need to Sell how am I going to Pay the real estate commissions on an Oregon Short Sale? I am broke so how am I supposed to pay you?
The money for the commission and the closing costs will come out of the Buyers money when the sale closes. Most of our clients just come in and sign and the costs are a part of the process. If we are working for a buyer it is not uncommon that they will in fact pay for some things as well… You as a seller are not expected to pay anything and that is the last thing we want.
18. Are short sales guaranteed to work?
No. All of the criteria must be met before a bank will even consider a short sale. Even then it isn’t easy to convince a bank that the market value of the home is lower than what they are owed.
Even if all the paperwork has been correctly completed it can take several weeks, or even months, only to be denied. If the lender does not approve the short sale, no transaction occurs. The Purchase Agreement becomes void and the listing continues.
19. How long does a short sale take?
A short sale can take 60 to 120 days or even longer to complete. This is very important. The process is complicated and takes a lot of time. So to exercise the short sale option, you must act quickly. If you wait until one week before eviction, no one can help you with a short sale. It is simply impossible. DO NOT WAIT. Our team can go to work quickly but you have to understand that all cases are different and there are no guarantees. Period.
20. Why do I have to sign a Borrower’s Authorization?
The Borrower’s Authorization gives the lender permission to speak to your representative about your loan. That’s all it does, but it is necessary. An authorization must be filled out for each mortgage and for each Realtor or escrow officer authorized to act on your behalf. We use a team of Short Sale Consultants and they will handle this process for all of us.
21. I have heard that I could owe income taxes after a short sale, is this true?
Possibly, but it’s not that simple. There are a number of factors involved. For example, are you an investor or is the property your primary residence. Is the debt on the property “purchase money” or has the home been refinanced. If you’re an investor or if the property was refinanced are you insolvent? You can see how the matter can become complex in very short order. You must consult with an attorney or CPA on this issue. However, without getting too complicated, I can provide our experience with this problem.
When a lender writes off part of a loan (discounts it) the portion written off is the equivalent of a cash infusion to the owner. This “mortgage relief” is then reported as income to you by means of a 1099C form.
Even if you receive a 1099C and declare it as income, there is a good chance you will owe very little tax. This is because there is an IRS rule regarding “insolvency” which essentially says if you are insolvent (more liabilities than assets) at the time of the short sale, you don’t have to count the 1099C as income (instead you declare it, then obtain the exemption). There is an IRS form to complete to show you are insolvent. See the Internal Revenue Service website at www.irs.gov
In December of 2007, President Bush signed a new law into effect providing that for a specified period of time homeowners who satisfy certain requirements will not be taxed on mortgage relief. This bill is called, the “Homeowners Debt Forgiveness Act” and it may or may not apply to your situation.
Again, please consult a CPA or tax adviser.
20. I am behind on my mortgage payments, but not yet in foreclosure. Can I do a short sale?
Yes, this is happening with much greater regularity. Sometimes these are the most attractive short sales for both the buyer and the lender because the buyer can take advantage of the lender’s ability to avoid the vast majority of the costs of foreclosure.
In these cases, it is more important to have a very clear “hardship” story to explain to the lender why you are unable to make the payments.
21. My house needs a lot of repair; can I still do a short sale?
Yes, though it can make the process more difficult because the price must be lower to compensate for the repairs. The key is to show the bank’s appraiser all the work that needs to be done. Let me know in advance if this is the case with your home.
22. I have more than 10% equity in my home – can I still do a short sale?
Probably not. However, you may be a candidate for a regular sale. Again consult with us so we can openly discuss these options and make sure that your home is really worth what you think it is.
23. I have other liens (i.e. mechanics, IRS, court judgments) on my house; can I still do a short sale?
Yes, but it gets much more complicated and will take longer. If this is the case with your home, be sure to COMPLETELY list all liens you have. Each lien holder must be negotiated with individually. A short sale in this circumstance will take substantially longer.
24. I have 2 or 3 mortgages on my house. Can I still do a short sale?
Yes, each mortgage or line of credit (HELOC) can be negotiated individually. It is important to know which mortgage filed the foreclosure or, if more than one are in foreclosure, which one filed first.
25. My Realtor tried to negotiate our short sale and screwed it all up. They did not know what they were doing and they over promised their ability. Does your team do this?
Great question. In Oregon many agents and brokerages are making money by offering their services in this area. Any agent can learn to negotiate a Short sale. The question we have always raised is ‘Why would they want to’? As Brokers we are Marketing professionals. As a Necessity we have been trained in Oregon Short Sales and Foreclosures and how to handle these tricky sales.
We made the decision early on not to try and be the negotiator. It is not what we do best. You would not have your Vet do your Taxes nor the landscaper fix your car. Why would you want a Realtor doing the job of an experienced Credit professional.
So our team has affiliated with some of the top Short Sale negotiators in the State. They are great at what they do. We are Great at what we do. So we have a team working for you. We work together and we succeed. We are closing 8 or 9 out of 10 Short Sales that we take on.
We are here to help.
