What Is A Short Sale?
Las Vegas Real Estate, Short Sales, Pre-Foreclosures, Las Vegas Certified Short Sale Specialist,
What Is A Short Sale?
A short sale is when your lender(s) agree to accept less than the amount you owe on your mortgage because you don’t have enough equity to sell the home for what is owed. Homeowners experiencing financial hardship and facing foreclosure often opt for a short sale to avoid the foreclosure process.
Short Sale Timeline:
This is a generalized timeline in which we usually see things take place during the short sale process. Every bank is different with its short sale process however this should give you an idea of what is going on during the time that your short sale is being processed. (All times are approximate.)
The short sale package must be complete with all required paperwork in order for us to send it to the bank. This timeline starts from the day we send your short sale package to the bank with an offer.
Weeks 1 – 3:
Once we send your short sale package into the bank, it generally takes around 7 days to upload it into their system. Once they review a complete package it will be assigned to a Processor. Within 7-10 days from the time it is assigned, The processor will order a Broker Price Opinion (BPO) on the property. The BPO agent will contact me to make arrangements to see your property. Once the BPO is turned into the bank and the bank has ordered any other documents they may require (such as title searches, lien searches, etc.) the file is complete and ready to be assigned to a negotiator. At this point the bank has not even looked at the offer; they are just preparing the file for the negotiator who will then analyze the offer.
Weeks 3 – 5:
Once your file has been assigned to a Bank Negotiator (which can take up to 2 weeks), the Bank Negotiator will then analyze the offer and depending if your loan is owned by the bank or an outside investor, this will take them around 5-10 days to review. At this point they will then give us a counter offer and other terms in which the bank may require from the seller and/or buyer.
Once we have this information, we will then go back to the buyer and seller who can then decide how they want to move forward. Once an agreement is reached we will then report back to the bank with our counter offer or acceptance. When the bank, seller, & buyer come to an agreement the bank will issue an approval letter in approximately 7 days.
If you have two loans and they are with different banks, then this process will take longer (approximately 2 additional weeks). We have to then negotiate with both banks until both are satisfied with the terms in order to get approvals. The second note may agree to accept a lower percentage of what is owed to move forward.
Weeks 5 – 8:
Once we have the approval letter from the bank(s), the buyer, if getting financing needs about 2-3 weeks to finish up their mortgage process and close.
Note: This is the timeline expected when the process goes smoothly and everything we need is provided timely. We have experienced the short sale process finish much faster than this as well as, take much longer; however this is the average amount of time we see take place (situations vary due to many factors, all parties involved will be updated regularly on the status of their transaction).
What happens to the lost money?
The result of a lender taking less money than what they are owed is called a deficiency. There are several ways a lender can handle a deficiency amount that will always be specific to your certain situation. During your consultation we will cover all of the banks options.
Forgiveness- In many cases when a short sale takes place the deficiency amount is forgiven.
1099 Tax Form- Once you have sold your home for less than what you owed, you should be aware that you will receive a form 1099-C for the amount of the lender’s losses. This is considered loan forgiveness in the eyes of the IRS.
If you have other assets such as savings and you are not insolvent, you may end up being responsible to pay ordinary taxes on the amount of the 1099-C.
If you settle a debt with a creditor for less than the full amount owed, you may be required to report this forgiven debt as regular income, with certain important exceptions. The forgiven debts include money owed after foreclosure or property repossession or credit accounts that you don’t pay. There are exceptions noted below. This can eliminate this obligation but you should consult with a good tax professional.
The Mortgage Forgiveness Debt Relief Act and Debt Cancellation
The Mortgage Debt Relief Act of 2007 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 short sale, qualifies for the relief.
This 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.
Promissory Note- A lender may ask the borrower agree to a promissory note that specifies the borrower pay a percentage of the owed amount back over an extended period of time in the form of monthly payments generally at 0% interest.
Cash Contribution- The lender may ask for a cash contribution in order to approve the sale, in most cases this can be paid by the seller or buyer.
Since each situation is different and is based on the individual sellers hardship, each lenders requirements will vary. The most important part is that none of these listed above are as bad as having a foreclosure on your credit.
It has been estimated that more than 81% of the mortgages in Las Vegas, Nevada are upside down. If you are in that position, and you need to move, in many cases, foreclosure is not the only choice, or necessarily the best choice.
For a majority of Nevada homeowners facing a foreclosure crisis, a short sale will give you the opportunity to sell your home for less than what is owed, Avoid Foreclosure on your credit history, Limit the damage to your credit; Pay absolutely no commissions, Pay absolutely no closing costs, Erase your mortgage debt on your primary residence, Get $3,000 cash at closing as relocation assistance for those who qualify, Get on the road to financial recovery faster.
Please contact me if you are interested in doing a short sale to avoid foreclosure. I can answer a lot of questions that you might have about the short sale process.
Get Moving With Linda!
702-677-8796
Free Short Sale Consultation
702-677-8796
Get Moving With Linda! Las Vegas Certified Short Sale Specialist
Opt For A Short Sale To Avoid Foreclosure
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Don’t Be A Victim!
Homeowners facing foreclosure are at risk of becoming victims of a foreclosure scam. Individuals involved in such scams convince vulnerable homeowners that they can save the homeowner from foreclosure. They tell the homeowner that they have direct contact with the servicer. They advise the homeowner that there are “federal laws” that require your lender to work with them. They assure the homeowner that they can help and will most always ask for a fee.
In reality, they are not there to help the homeowner: They only want your money or your home. They encourage the homeowner to stop working with their lender, servicer and tell them that they will take care of everything.
Some common scams are:
• Bailout or Rent-to-Buy– Includes various schemes where homeowners surrender their title to the house thinking they will be able to remain as renters and buy the house back in a few years. In actuality, the terms for buying the house back make it nearly impossible for the homeowner to do so.
• Bait and Switch – Homeowners believe they are signing documents for a new loan to make the mortgage current, but sign away their home and are left holding the mortgage on a home they no longer own.
• Phoney Counseling or Phantom Help – The person conducting the scam tells the borrower that he can negotiate a deal with the servicer to save the house if the borrower pays a fee first. Once the fee is paid, the person takes off with the money and provides no assistance.
• Bankruptcy Foreclosure - The rescuer promises to negotiate with the lender on the borrower’s behalf for a fee. The rescuer takes the fee and files a bankruptcy case in the borrower’s name and without the borrower’s knowledge. (A Bankruptcy foreclosure will prevent you from buying a home in the future and stays on your credit for 10 years).
New scams are always developing. If the assistance looks too good or too easy or if you are asked to pay a fee for foreclosure prevention services make sure, verify that the service and company contacting you is legitimate.
Linda Strasberg, All Rights Reserved
