General FAQs

How does a short sale work?

Simply stated, a short sale is a program that allows you to sell your house for less than you owe across your mortgage(s) and other liens, and customary closing costs. Your mortgage company will allow you to sell your home for its market value and will forgive any remaining debt, no matter how big the difference between the balance of the mortgage(s) and the sales price may be. 


For example: 

Mortgage 1 Balance: $450,000

Mortgage 2 Balance: $50,000

Closing Costs (est.): $30,000

__________________________

Total Debt + Closing Costs: $530,000

Sales Price: $350,000

__________________________

Net: -$180,000* (You will NOT owe the this amount! The debt is forgiven)

Am I going to be responsible for the difference between my home's sales price and mortgage deb(s)?

No. My team works to ensure 100% debt forgiveness for all of our clients. 

How much does a short sale cost?

Nothing. Your closing costs, attorney fees, and brokerage fees are all paid by your lender. There are some instances where debts are not covered by your mortgage lender - those are typically outstanding HOA dues and water bills. But even if those debts are sizable, my team has had tremendous success in settling them so that the homeowner does not have to pay at all. 

What are the benefits to doing a short sale?

Debt forgiveness, removal of a judgment of foreclosure, and credit improvement are just a few of the benefits to working with a short sale. 

Are there tax consequences to short sale debt forgiveness?

The short answer is "no", the vast majority of sellers will not have consequences. Only one of my clients has ever been taxed on debt forgiveness, but it was an error which we helped them resolve completely.

Can't I just give my house back to the bank?

Unfortunately, even if you decide you're ready to walk away, giving your keys to the bank and moving on will NOT get you off the hook for the mortgage debt, and the bank will still have to go through the full foreclosure process. This is exactly what we work to avoid by doing a short sale. A sheriff's sale/judicial sale is the worst thing that can happen. If your home goes to auction, the bank(s) may hold you liable for the mortgage debt in the form of a deficiency judgement.

What sort of paperwork is required in order to do a short sale?

It depends upon your particular situation, are there are exceptions, how most homeowners are required to submit two years of tax returns, bank statements, paystubs or other proof of income, a list of household expenses and a hardship letter. There are several exceptions to these requirements and workarounds in case a homeowner is unable to find said documents.

Do I need an attorney?

Yes. An attorney is a critical piece of the process, as they will help ensure that your debt obligation to your lender(s) is waived. 

Will a short sale hurt my credit?

The damage to your credit for some of the alternatives, including bankruptcy and foreclosure, are far more damaging to your credit than a short sale. Once a short sale is completed, the "dings" on your credit report for nonpayment stop "dinging" and your credit will start to get better as soon as the next credit reporting period, typically 30-45 days. 

I am an agent, or a family member is an agent - can I or they list my property in a short sale?

99% of the time the answer to that is "no" due to arms length and other short sale requirements. 

Process and timeline

If I start a short sale today, how much time will I have before I have to move out?

This is one of the questions I am asked most often. It's almost impossible to give an idea of timing without knowing details about your specific situation. I have had short sales take two months, and some have taken 2.5+ years. Call me if you'd like me to give you an estimate based on your personal situaiton.

Do I have to show my home to potential buyers?

Generally speaking yes, but not always.

Do I need to keep utilities on if I move out or if the house is already vacant?

You should to prevent freezing pipes and/or flooding basements, but if you cannot afford to or do not want to, we can normally find a workaround.

Will I need to make any repairs to my home?

Nope! A short sale is a completely as-is sale, no matter the condition of your home.

Your Personal Financial Situation

I’ve already filed for Ch 13 or Ch 7 bankruptcy, or had a bankruptcy discharged. Why would I still want to do a short sale?

Many of my clients have done a short sale after filing for bankruptcy, for a variety of reasons, including getting more time in their home, ensuring that any possibly reaffirmed debts are settled, and to avoid having a foreclosure on their credit report. This is a matter that needs to be discussed and evaluated with an attorney. 

I make a lot of money, or I have a lot of money saved. Will that disqualify me for a short sale?

Nope! Short sales are approved in cases of hardship. Even if your hardship was resolved years ago, you can still qualify. 

I want to buy a new home in the near future. Will doing a short sale hurt my chances of getting a loan?

As an alternative to foreclosure or a bankruptcy, a short sale will allow you to purchase a new home with VA or FHA financing as soon as 1 year after you close on your short sale. Fannie and Freddie programs require a slightly longer waiting period, between 2-4 years. With a foreclosure or bankruptcy, you will not be able to qualify for a mortgage until at least 7 years after the debt is discharged.

Are there tax consequences to debt forgiveness in a short sale?

The short answer is "no", the vast majority of sellers will not have consequences. Only one of my clients has ever been taxed on debt forgiveness, but it was an error which we helped them resolve completely.

I own multiple properties. Will that disqualify me for a short sale?

Absolutely not. In fact, owning multiple properties is even more of a reason to want to avoid foreclosure by either settling the debt or doing a short sale.

What if I am in the process of buying a new house already, how will a short sale affect that?

You definitely want to be careful if you're buying a new home before resolving any debts and foreclosure action on another property. That answer depends on a number of factors.

How do I qualify for "cash for keys" of $3,000? Can I qualify for more?

"Cash for Keys" or Relocation Assistance is provided on a case by case basis and is at you lender's discretion. Qualifying for cash for keys generally requires the home be owner-occupied. That said, there are instances where the occupancy rule does not apply. Our team always asks for the max amount of relocation money that is available, which is usually capped at $3,000 but sometimes can be as much as $10,000.

What happens if I am currently in a loan modification?

If you find yourself unable to keep up with your modification payments, or you're simply ready to move on, a short sale could be a great option for you.

Your Individual Mortgage Situation

What happens if I have two mortgages?

No problem. The majority of short sales I have worked on have at least 2 mortgages. Once both lenders approve the short sale, you will not be responsible for any debts left behind.

Can I do a short sale if I have other liens on my property (i.e. IRS tax liens, judgements, Homeowners Association liens etc.)?

Yes! With the help of an attorney, we can have these liens removed or resolved completely in order to complete the short sale.

What if I owe money to my homeowner’s association?

The vast majority of our clients do not have to pay anything to their HOA at closing. Keep in mind, though - if you are living in the property and not paying the HOA, the HOA most likely can and will evict you, sometimes even before you're in late stages of foreclosure. We can help with all of this.

What happens if my home goes to foreclosure sale / judicial sale?

This is exactly what we work to avoid by doing a short sale. A sheriff's sale/judicial sale is the worst thing that can happen. If your home goes to auction, it's just a matter of time before the sheriff comes to evict you from your home, and the bank(s) may hold you liable for the mortgage debt in the form of a deficiency judgement.

Can I do a short sale on a property I inherited?

Most of the time, yes! My team can help with setting up estates, going through probate, etc. 

What if the house has a reverse mortgage?

This is a great question! Recent changes to the short sale guidelines on reverse mortgages make it possible for an heir of a property to purchase that property for a portion of it's market value, if so desired. As an heir, you can also do a short sale, or traditional sale if there is equity.

None of the information listed on this page or anywhere on this website is intended to be inferred as legal or tax advice. Please consult an attorney or tax professional for more information.

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