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FAQs - Short Sales

1. What is a Short Sale?

A short sale is a transaction that allows the sale of a property for an amount less than the amount owed to the bank. The bank in return accepts the proceeds as settlement of the debt. Florida is a “with recourse” state and the bank could pursue collection of the uncollected balance.

2. How long does it take to close a Short Sale?

It depends on the property location, the lender’s and other factors, but in general a short sale can take anywhere between 3-9 months.

3. What happens to the seller’s credit rating when they short sell their property?

Typically the loan will show up as "paid" on their credit report; however there will be a notation that says "settled for less than originally owed" or something along these lines. It is more favorable for a homeowner to short sell than to have a foreclosure or bankruptcy on their credit report. A short sale will affect the credit of the seller for 1-2 years where a foreclosure or bankruptcy will affect the seller’s credit for 7-10 years.

4. What documents does a seller include in a Short Sale package?

Documents depend on the lender. Each lender has different requirements. It is typical to require an Authorization to Discuss for the Agents, a hardship letter, purchase and sales contract, settlement statement (HUD 1), net sheet, pay stubs, bank statements, personal financial sheet (monthly budget), amongst other things.

5. Are there different treatments for Short Selling a property that is your primary residence vs a property that was purchased as an investment?

A primary residence might receive the HAFA treatment which has proven quite effective assisting the homeowner’s transition. The investment property is not eligible for HAFA

6. How late in the pre-foreclosure process can you start a short sale?

Try to allow a window of at least 30 days to effectuate a mortgagee approved pre-foreclosure short sale.

7. Will the borrower have to pay taxes for a Short Sale?

The borrower may pay extra income tax if the bank sends a 1099 for the deficiency. If the subject property is the borrowers Primary Residence then the taxes on the 1099 will be calculated based upon the Mortgage Forgiveness Debt Relief Act of 2007 HR3648

8. What percentage of mortgage companies send someone out for an appraisal on a possible short sale?

All lenders order a BPO or full appraisal of the property before making their decision to accept or reject the short sale offer. This is there only way of assessing the value of the property.

9. Can an owner profit from a Short Sale?

The seller cannot profit (monetarily) from a pre-foreclosure short sale

10 How do bankruptcies affect the possibility of doing a short sale?

Most mortgagees won’t consider a short sale if the homeowner is in bankruptcy...why? Because negotiating a short sale payoff is considered a collection activity. Collection activities are prohibited in bankruptcy.


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