FAQ’s

What is a short sale?

A short sale is when a lender voluntarily accepts less money than what is owed.  The first thing you need to know is that your lender does not want to foreclose on your house!  Your lender is in the business of lending money, making money on the interest you pay each month, NOT the house itself.  When you can’t pay your mortgage any longer due to a financial hardship, it’s in the lender’s best interest to accept a short sale instead of foreclosing.  Taking the property back and selling it as an “REO” property presents numerous risks for the lender, not only liability-based risks of fire, theft, etc., but financial risks as well.  Most buyers won’t pay as much for an REO property as they will a short sale or “regular” property so the lender will lose more when they own it following a foreclosure.   The bottom line is, the lenders are able to mitigate their losses and risks by accepting a short sale (regardless of what they tell you on the phone).

So, how can Short Sale Monkey help you?….

Have you tried to communicate with your lender, only to be discouraged by being on hold “forever”, talking to someone different every time, finding out that documents you sent them are “missing”, and often hearing that they WANT to help you, but it seems that when the rubber meets the road,….they don’t? We understand how stressful and difficult it can be to work with your lender.

With Short Sale Monkey’s very efficient system in place, we do all the work FOR YOU!  We’ll collect all the necessary paperwork, initiate contact with your lender, and take care of all the details of the shorts sale, giving you online access to your file so you can follow along.  The goal is to get the short sale approved as quickly as possible so you can put this situation behind you.  Even if you’ve tried to sell your home in the past, or have it listed now, we’ll gladly work with your listing agent.  If your property isn’t for sale yet, but you know you need a short sale, we’d be glad to put  you in touch with several high-quality, service-oriented Realtors so you can select the one you like best.  We will make it work either way.

What happens to my credit report with a successful Short Sale?

Preventing “Foreclosure” from being reported on your credit report is one of our goals.  Although each lender reports the result of a short sale differently, the most common remarks submitted to the credit bureaus are “Account Settled.  Less than full balance”.  There are different opinions regarding the numerical impact of this reporting since the decline in your score is dependent upon your OVERALL credit picture, not just the impact of short sale itself.  In addition to the short sale reporting, the late payments will also be reported during the process itself.

At the end of the day, the damage to your credit from a short sale is MUCH LESS than that of a foreclosure and lenders like Fannie Mae have agreed to lend to homeowners that have completed a short sale as early as 2 years later.  However, if a foreclosure takes place, Fannie Mae won’t support a loan for you for 5 years.  We’ve provided you with the actual guidelines for you to review by clicking here….New Fannie Mae Guidelines.

One of our goals is to get a “Cashless Closing” approved for you.  This simply means that on closing day, you don’t bring any money and you don’t get any money.   However, there are some situations where this is not always possible.  For example, your lender may not agree to pay all of your unpaid HOA dues, or, if you have a 2nd mortgage they may want more to settle their loan than the 1st lien will allow them to have.  The simplest way to prevent these complexities from arising is to keep any HOA dues or 2nd mortgage payments current, if at all possible.

You cannot stay in the property after the sale is finalized and closed.  The lender will not permit the homeowner to receive ANY financial benefit, under any conditions since they have agreed to take a financial loss.  Your occupancy after the lender accepts the short sale could be interpreted as a benefit and therefore considered bank fraud.  This is the primary source of “Foreclosure Rescue Scams” you continually see and read about in the news.

Are you in an active Bankruptcy, or thinking of filing Bankruptcy?  No problem, we can still help you.  The property can still be listed for sale and a buyer found.  However, we will not be able to COMPLETE the transaction (get an approval for the short sale and go to closing) until the bankruptcy is discharged, dismissed, the court issues a relief from stay, or the bankruptcy trustee allows an abandonment of the asset.  We simply make our role known to all involved and your intent to short sell the house.  We then monitor the entire bankruptcy process until it is legally possible for us to proceed, and in some cases, shorten the process time greatly by simply communicating the situation to all involved.

How do we make money?   We either get paid within the transaction itself, or we get paid by the buyer.  At the time of listing your property for sale, your listing Realtor will receive a disclosure from us which will be attached to the MLS listing, explaining our role and the responsibility of the buyer(s) to pay us.  Everyone involved knows everything up front, so there are no surprises.

Ultimately, we want the lender(s) to pay us because we are working to protect them from much larger losses in the event of a foreclosure.  Even though this is true, sometimes they still won’t pay. The other party to the transaction that we are creating the most value for is the buyer.  Since we are working with the lender to get the buyer a good discount on the property, it makes sense that they pay us for doing this, otherwise they would just be paying more for a different house. 

How long does a short sale take?  Once an offer is submitted to the lender(s) it can take between 60-90+ days for an acceptance letter to be received from the lender(s), plus an additional 30 days for the buyer to close.  If there is a looming foreclosure auction date we will work to have it postponed to allow the buyer enough time to close.  However, it will be up to your lender whether or not to grant the postponement.  Keep in mind, short sales CAN take longer if there are additional complexities involved with your property, such as a 2nd mortgage, a HELOC loan, IRS liens, judgments, etc.

The Fine Print…

There are financial consequences from a short sale transaction. Please keep in mind that we are not CPA’s, tax accountants, financial planners, or attorneys.  If you feel you need to contact an attorney or a CPA, please do so.

What happens to the unpaid amount?  Do you have to pay it back?  In a short sale of your primary residence, the Mortgage Debt Relief Act alleviated much of the tax consequences.  We encourage you to review the following Mortgage Debt Relief Act of 2007 for more information.  (This Act expires in 2012.)  For property other than your primary residence, in both a short sale and a foreclosure you could be taxed for the difference between what you owe and what the bank receives as payment because the IRS considers this income.  The good news is, that by getting a short sale approved, the loss to your lender(s) is ALWAYS LESS than that of foreclosure, so your possible liability is less. Visit the IRS website on more specific information relating to this issue: Questions & Answers on Foreclosure and Debt Cancellation.

It is important to remember that a short sale acceptance is not guaranteed, and depending on the details of your situation, the bank has the right to recourse through a judgment in which you are told by the court to pay back the loss the lender incurred.  THESE ARE VERY RARE and we work hard to prevent this from happening (usually, judgments are pursued in situations where the owner has extensive assets, high earnings, and “an ability to pay”).  One thing to remember here is, A SHORT SALE RESULTS IN A SMALLER LOSS TO THE LENDER THAN THAT OF A FORECLOSURE.  So, IF they decide to pursue being paid back through a judgment, the amount being sought after a short sale will be LESS than that sought after a foreclosure.

Another way your lender(s) may offset some of their loss is by asking you to sign a Promissory Note at closing in which you agree to payments over a period of time at 0% interest.  Also very rare, they can ASK, but most often we are able to get this removed from the terms of approval.

Most lenders will simply choose to “write-off” the loss and by doing so, issue a 1099 form to the IRS.  Although reporting this loss as income to you via the IRS, the AMOUNT of the loss will almost ALWAYS be less than that experienced in foreclosure by the lender.

The main points to understand about short sales are 1) they are LESS DAMAGING to your credit than a foreclosure, 2) you get to stay in the property during the process, 3) it can still be done WITHIN a bankruptcy, 4) they take time to complete (often 3-6 months), and 5) no 2 transactions are the same.