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Short Sale FAQ
HAFA
FAQ
(Home Affordable Foreclosure Alternative)
Utah Foreclosure
Laws
Experts in Getting
Short Sales Closed
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Short
Sale Help, Short Sale FAQ, Utah Short Sale, HAFA, HAMP, HAFA FAQ, HAFA Participating Lenders, Short
Sales, Short Sale in Utah, Stop foreclosure, preforeclosure assistance, Short Sale FAQ, Utah
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How do I stop
foreclosure? Short Sale FAQ Frequently Asked Questions
Top Ten Short Sale FAQ
Number 1
I can’t make my house payments but I do have an ability to pay back
all or part of the negative equity. Also, I want to preserve my credit score…is a short sale right
for me?
Probably not. In cases where the seller can pay back all or part of the negative equity (usually to
the 2nd lien holder) it makes sense for them to work out a repayment plan. The lender will then
release the lien and allow the home to close.
Number 2
If I pay mortgage insurance but default on my loan, why wouldn't
that cover the deficiency amount?
The mortgage insurance is not there for your protection, it only protects your lender.
Number 3
Do I have to have my home ‘Approved’ by the lender prior to
offering it for sale as a short sale?
No. Technically speaking there is no such thing as being ‘Short Sale Approved’. The actual approval
only happens with an accepted offer.
Number 4
I just missed a payment and I know I will miss more….how long does
the foreclosure process take and is there time to do a short sale?
The foreclosure process takes differing times depending on your state. In the Midwest a foreclosure
can take over a year. In California it’s taking 6+ months. Generally speaking a well-priced short
sale being processed by an educated short sale listing agent will sell and close in less than 120
days.
Number 5
Will I still have to pay property taxes if I do a short
sale?
Property taxes will always have to be paid as part of any accepted short sale. Whether it’s you or
the lender depends on their policies and the specific agreement you reach while negotiating the
short sale. Your real estate professional will be able to negotiate all or most of your property
taxes into the transaction. Many times the lender will cover the entire cost.
Number
6
I owe more than my home is worth and I can’t make the payment, do I
have to somehow qualify for a short sale?
The simple answer is NO. If someone can’t make their payment and they are otherwise insolvent they
qualify for a short sale. Note: insolvent simply means their total debts are greater than their
assets.
Number 7
Do I have to pay income taxes?... I have heard
that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me…the
seller? Is this true?
You will probably receive a 1099 but may not have to
pay the taxes on that. Consult your Tax Attorney or Qualified CPA. The year you do a short
sale is not the year to do your taxes yourself. Get professional advice.
The debt relief act of 2007 allows the tax debt to be
discharged in a short sale, mortgage restructuring, or foreclosure as long as the property is
your primary residence. The Mortgage Debt Relief Act allows debt to be forgiven through
the 2012 calendar year. You can be forgiven up to $2 million if filing jointly, or $1 million
if filing separately.
The exclusion does not apply to
any other discharge due to services performed by a lender not related to a decline in your
homes value. This act was implemented strictly for homeowners in distress, and is most
commonly used after selling a home in a short sale transaction. Here is the link to
IRS. http://www.irs.gov/individuals/article/0,,id=179414,00.html
Number
8
Who pays the real estate commission and closing costs? I
can’t afford to pay that.
The bank will pay the commission along with all the other usual closing costs.
Number 9
Do I have to miss a payment to do a Short Sale?
No. Late last year most major lenders started accepting short sale offers from sellers who have
never missed a payment but have extenuating circumstances.
Number
10
I want to do a short sale, but I have a 2nd mortgage as well as a
first, does this make me ineligible?
No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your
first lender will be paid off by the sale, then you just negotiate the terms with the second
lender. Most short sales do involve 1st and 2nd lien holder. Real estate professionals who are
trained in short sales routinely negotiate transactions involving up to 3 mortgages.
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