Seller's Short-Sale FAQs...
What is a Short-Sale? A short-sale is an "arrangement" between the owner of a home and the bank(s) that loaned them the money, to settle for an amount which is less than the total amount owed to pay off the home.
Is a Short-Sale like a foreclosure? No. A short-sale differs from foreclosure. In a foreclosure, the homeowner falls behind on their payments and the bank repossesses the home and re-sells it. Banks do not want to own homes. They do not want to incur the legal costs associated with foreclosing, nor do they want to assume the costs of the utilities, upkeep and subsequent selling costs of the home. In most cases, after a foreclosure, the bank(s) pursue the homeowner for the deficiency, many times forcing the homeowner into bankruptcy. Depending on state law, the lender may or may not be successful in obtaining a deficiency judgment.
Will the bank come after us for the difference with a Short-Sale? They may investigate that option ahead of time, but unless you have significant assets, most banks will not. As your negotiator, I will work hard to obtain a written release of any future indebtedness prior to proceeding to escrow. If the bank does not agree to terms which are acceptable, you have the option to back out of selling your house.
Will I have to provide personal information? All lenders require a complete short-sale package, including tax returns, bank statements, pay stubs, etc, to show that there is a hardship and/or the need to sell. Be prepared to answer some nosey questions and to promptly update your information along the way as the bank requires.
Will a Short-Sale damage my credit? The short answer is "yes", but it varies in part depending on your bank’s reporting practices and if you're making your mortgage payments during the short-sale period. All banks are different, but many report “mortgage paid”, “settled” or “paid/settled in full, less than agreed” with varying degrees of impact. In addition, any late payment history will still appear, as will any default filings. What you’ll avoid is a “foreclosure” reporting, which can have devastating credit consequences for many years.
How long will a short-sale take? This is totally up to the lender. We’ll submit the offer with the short-sale package and that will trigger the start of the negotiating time. Some lenders take as little as a few weeks, some over six months. The average negotiating time has been running approximately 60-90 days (give or take). If there is more than one lender (example a 2nd mortgage), it may take a bit longer, as the banks need to negotiate between each other as well. The only way to know is to start the process. A short-sale transaction requires a lot of patience and cooperation by all parties involved.
Other than that, will the house be marketed as usual? Can I stay? Yes. Your house will be listed on the RMLS database and marketed/advertised to buyers and other agents just like a standard sale. You can remain in your house if you’d like and it will be shown at your convenience. Once the offer has been approved by the bank(s), you’ll have until closing day to vacate (normally about 30-days after bank acceptance). We’ll be in communication every step of the way.
Do I have to pay my own Realtor? Will I have other costs? No. The usual selling fees and closing costs associated with the sale of the home will be factored into the sale and negotiated with the bank(s).
Will I get any money from the sale? No. Since we’re asking the bank to take a loss, most will not allow the homeowner to receive any money. If the lender thinks you are getting proceeds from the sale, they may immediately halt the deal.
What price will we ask for the house? Remember, it won’t make any difference to you, since we’re asking the bank to write off any deficiency. To get an offer quickly (and encourage the buyer to wait patiently), we must list the property a bit below the current market value. We can review the market data and establish the price together.
* General information provided as a courtesy. Legal & tax advice is beyond my area of expertise. Please independently confirm issues that may apply to you with your attorney &/or tax professional.