Short Sale Frequently Asked Questions
Many of our customers have common short sale questions as they begin to learn more about short sales. Below you will find answers to the typical short sale questions:
- I am behind in my mortgage payments, what can my bank do? If you have missed some payments on your mortgage, your bank or lender can legally begin the process of foreclosure.
- If I let my home go back to the bank through foreclosure, can I just walk away from it? Unfortunately, this is not how it works. If your property is foreclosed on, the lender can get a deficiency judgment against you for the difference between what you owed and the amount they were able to get when they sold your house. In addition, you could owe money to the IRS because they often tax the amount of a charged-off debt as a gain or income to you.
- Are there really any options to foreclosure? There are a number of legal options open to those who wish to avoid foreclosure. You can choose to go with a short sale, a loan modification or work-out, or a deed in lieu.
- What can I do if I have fallen behind on monthly payments on my house? It is important to get help as soon as possible. The sooner you begin working toward a solution, the more likely it is that you can avoid foreclosure. In fact, if you haven’t missed a payment but realize that you probably will in the near future, you should talk to your lender and explain the issues that are causing you to get behind on payments.
- What is a loan modification or work-out resolution? When you work with your lender, you can sometimes work out a solution to your late payment problem. You may come to an agreement where you keep making payments on the amount that is overdue, or you may be able to modify your loan terms to either extend the length of the loan or reduce the interest rate or a combination of the two.
- Can I still do a short sale even if I have been behind on payments for a while? Even though you can go through a short sale if you have been behind on payments for a while, it is best to work on a short sale as soon as possible. As it gets closer to the actual foreclosure sale, the lender must spend more money on that process, and will be less likely to agree to a short sale.
- If I have received a notice of foreclosure, can I still do a short sale? Even if you have received an official foreclosure notice, you may still have time to pull together a short sale. Each state has specific rules on this, so it is important to talk to a professional as soon as possible about your options. A notice of foreclosure means that paperwork is being filled out by the lender and the legal process is being started so that they can repossess your house. However, there is still time to negotiate a short sale if you get started right away.
- Will I be denied for a short sale if I was already turned down for a loan modification? Since two completely different departments within the lending company handle these options and the approval processes are completely different, you should still try for a short sale even if a modification was not possible.
- Isn’t it hard to qualify for a short sale? Qualifying for a short sale mainly requires you to have a verifiable financial hardship and to owe more on your house than its market value, so it is easier than most people think.
- Doesn’t the bank prefer foreclosure to short sales? A lender will often lose in the neighborhood of $50,000 on an average home when a foreclosure occurs, so if the short sale will put the bank in a better financial position, they are very willing to go that route. Banks do not want more foreclosed homes to try and sell.
- Don’t most short sales get denied, and isn’t it a hard process to go through? Short sales that don’t follow correct procedures may get denied, but an agent with plenty of experience in this area knows how to avoid the pitfalls. It can be time consuming, but will ultimately be worth it.
- If I don’t have much cash on hand, can I afford a short sale? There should be no out of pocket costs associated with a short sale. The real estate agent’s commission is paid by the bank.
- How long will it take for me to be eligible to buy another house after I go through a short sale? While the length of time varies, most people should be eligible to get a new mortgage loan within 12 to 24 months.
- Should I leave my home if it is getting foreclosed on? It is important to speak with an attorney about when to leave your home. If you abandon it, there may be negative consequences.
- Is there anything else I should know? Watch out for scams. You should never have to pay a fee before receiving foreclosure or short sale services.
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