Question: Will I be responsible for the difference between what I owe and what the house sells for?

Answer: California is a non deficiency state; however there are specific requirements in order to qualify. Most lenders will put the following verbiage on the short sale approval letter (or something similar) “Lender will not seek a deficiency judgment against borrower.” In most cases if a lender accepts a short sale they are going to write off the loss, show the debt as settled and you are able to walk away from the debt without having to worry about the lender coming after you. There are a few lenders who are potentially pursuing borrowers after a short sale. Contact us to find out which ones.

Question: Will I owe taxes on the amount of loss that the bank takes on my short sale?

Answer: In both cases, with short sales and foreclosures the difference between what you owe and what the lender receives may be reported to the IRS and you will be taxed on that amount at the end of the year (1099C). The good news is there are several ways to avoid this tax including legislation. You can research the Mortgage Forgiveness Act of 2007 or see if you qualify for “insolvency”. Contact your tax advisor.

Question: What is a “hardship” to the lender in order to qualify for a short sale?

Answer: Today it is harder to not qualify, than to qualify. There are numerous ways to qualify for a short sale and a borrower does not have to be behind on payments. If a borrower can show they are struggling to make payments or are facing some other type of hardship such as divorce, tenant moving, job transfer, medical emergency, decrease in pay, etc, then a bank will consider approving a short sale.

Question: After a short sale when will my credit permit me to purchase another home?

Answer: A new loan can be obtained under Fannie Mae (Conventional) after two years with a short sale. However Fannie Mae will not allow you to purchase a home for 5 years if you have a foreclosure on your credit.

Question: How long does it take to complete a short sale?

Answer: A short sale takes on an average 3 to 4 months from beginning to end.

Question: What is included in the short sale and service you provide during the 3-4 month process?

Answer: We do the entire process. The house is marketed on MLS (Multiple Listing Service) just like a typical listing. Buyers view the house (accompanied by the Buyer’s Agent) and an offer is submitted. Once an offer is submitted, the entire short sale package is submitted to the lender(s). Once the lender has the package it usually takes about 4-8 weeks before the lenders order a BPO (Broker Price Opinion) or an independent appraisal on the house. This appraisal will tell the lender the value of the property; in turn once the lender has their own assessment of value of the property they will do the following: (a) Accept the offer (b) Counter offer. Once an accepted offer is established a traditional 30 day escrow typically takes place.

Question: Do I need to keep showing the home during the entire process?

Answer: No, once we have received the first offer and perhaps one or two ‘back up offers” it is not required to constantly keep showing the house, allowing you to resume a normal living pattern.

Question: How difficult will it be for me to rent a house after a short sale?

Answer: You are not alone, since the beginning of the housing collapse many landlords have rented to many well qualified homeowners who have had a short sale or foreclosure. As rule there are several factors that a future landlord will consider including the rest of your credit and perhaps most importantly is your current monthly income.

Question: Do I need to do any “fix up” or preparation to the property?

Answer: The property is being sold “as is’ and no improvements are required from you the Seller. The current condition of the property is reflected in the selling price of the property.

Question: Am I required to display a “for Sale” sign in front of the property?                                                                  Answer: No, a sign is optional. If a sign is in place, it simply reads “For Sale” with our real estate company name (Your Advantage Realty) and phone number.