FREQUENTLY ASKED QUESTIONS
As a result of the Homeowner not being able to make their mortgage payments, the Lender takes action to seize the property. Basically, the Homeowner borrowed money from the Lender, using the house as collateral. There is an agreement that if the Homeowner does not maintain payments, then the Lender could take the house.
A Short Sale is when the Lender will accept less than the full amount due on a mortgage when a property is sold.
As a Homeowner where can I find more information so that I can avoid Foreclosure?
Watch this Video from the U.S. Department of Treasury's Making Home Affordable program
The reason is simple. A Short Sale often has a better return on investment to the lender than a foreclosure. The savings a lender sees from a Short Sale compared with a foreclosure are substantial. Not only does the lender receive this savings, they are also paid on the loan 6 months earlier than in the foreclosure process. This allows them to collect and cash-out earlier than they would in a foreclosure. Plus, lenders spend a great deal of money with attorneys to complete the foreclosure process. Lenders created the Short Sale process as a foreclosure alternative for these reasons. The incentives to perform a Short Sale on your property are in place to motivate you to participate.
Additional reasons for the Lender to accept a Short Sale:
At EAG & Associates we feel that Real Estate Agents should focus on what they do best and that is assisting buyers and sellers.
Some reasons that other Real Estate Agents have come to EAG & Associates:
There is never an out-of-pocket expense to EAG! Period.
We collect fees from the lender, and only when the property has successfully gone to Closing. We do NOT collect from the commissions. AND ... if the deal does not close, EAG seeks no compensation.
Yes. We we have successfully negotiated and received an approval on a Short Sale even when the Homeowner was current on their payments. However, the Lender has the upper hand and negotiations are more difficult when Homeowner is not in default.
Yes. It doesn’t matter how much you owe. The lender will evaluate what the current market value is and then decide how much they will accept.
Yes. Lenders are more motivated to do a short sale on a property that needs work than on a property that doesn’t. Lenders know losses start to skyrocket when they foreclose on a property that needs a lot of repair work. Lenders are in the business of lending money not property management and home repairs.
Lenders are understanding when it comes to this situation and will actually pay the REALTORS® commission and your closing costs.
A Deficiency Judgment can arise if the bank sells the house for less than the mortgage debt. Thereby, lenders can hold the you responsible for the unpaid portion of the loan. This can result from a Short Sale or a Foreclosure Property. The Lender may be allowed to take further legal action. Some states have restricitons and regulations on deficiency judgments, but unfortunately the majority do not.
The majority of Lenders will not choose the deficiency judgment option and choose to write off the loan. If they choose to pursue a deficiency judgment on the balance owed, the amount can normally be settled for pennies on the dollar.
EAG & Associates always seeks a full release of any lien and request that the debt be considered settled.
Upon successfully closing a Short Sale, lenders will always report a loss to the IRS and issue a 1099. However, the Mortgage Forgiveness Act of 2007 was signed into law on 12-20-07 and is now official, effectively getting rid of the question "will I be taxed on the Short Sale". Prior to this Act, forgiven mortgage debt due to foreclosure, short sale, or deed in lieu of foreclosure, was potentially taxable income to the borrower.
This was the subject of much media attention and led to many questions and concerns from Sellers wondering whether or not they were going to get “hit with taxes” on the Short Sale.
This will effectively put an end to the question from Sellers... will I be taxed on the Short Sale discount of my primary residence. The definitive answer (at least until the end of 2012) is NO!
If the Homeowner has to Short Sale their home they’ve most likely missed payments already. That in and of itself has already adversely affected the Homeowner's credit. The key here is to stop the devastating affect on your credit that a Foreclosure causes. A Foreclosure is the most damaging record on your credit report – its even worse than bankruptcy. A Short Sale, on average, can affect a homeowner's credit by 50 points, while a Foreclosure can adversely affect the credit score by 300 points.
By working with EAG & Associates you give yourself a fighting chance of avoiding Foreclosure and start towards the “Rebuilding” process. With our help, your credit will recover quickly if you keep your other lines of credit in good standing. With EAG & Associates you have an experienced team of professionals that will help you through these tough times.
A credit bureau is the only true source of information for determining how a Foreclosure or a Short Sale is going to affect your credit. Therefore, we are not attempting to provide any form of legal advice.
However, from our experience with homeowners, a foreclosure usually shows up as FORECLOSURE and can stay on your credit report for ten years. A short sale transaction is commonly listed as SETTLED FOR LESS THAN BALANCE.
Please consult a credit bureau for how a Short Sale and a Foreclousre will actually affect your credit.
Lenders are increasingly willing to work with borrowers faced with a financial hardship to accept a discounted payoff on a mortgage. If you are faced with a hardship, and are unable to meet your obligation on your mortgage, the Lender would prefer to settle the matter with you as opposed to taking the property through Foreclosure.
As you consider the option of pursuing a Short Sale, remember your Lender is looking to limit any potential loss on your loan. By completing a Short Sale, your Lender has arrived at a solution that is, for them, much better than a costly Foreclosure.
To some extent, that will depend upon the mortgage company considering the Short Sale request. Generally, as long as the hardship is real and the mortgage company believes the loan is likely to become delinquent as a result, the Short Sale request will be processed by the Loss Mitigation Department. A big key to getting Loss Mitigation to accept a hardship is to submit a strong hardship letter. The hardship letter sets the tone for the entire file.