A Short Sale can be a daunting and intimidating task but I’m here to help!! Please read through my Frequently Asked Arizona Short Sale questions. Once you are ready to get your property active for sale, give me a call and we’ll get started.
What is a Short Sale?
A short sale is when a homeowner owes more to the bank than the value of the home and the bank agrees to sell the property for less than is owed. For example, if your outstanding mortgage balance is $450,000 b
ut your home is only worth $300,000 then you are “upside-down” and may be able to do a short sale to get you out of the property.
Why would a lender want to do a short sale?
A Lender or bank takes a discount or agrees to a short sale because it saves them money. It also gets bad debt off their books so they can reinvest that money by giving out another loan to a customer. On average, a lender loses between $30,000 to $80,000 on each property that they foreclose on.
What is required to do a short sale?
Every Lender or Bank has its own set of required information and some may even have a set of paperwork specific to them. But, in general, most banks require at least the following: A hardship letter, financial statements, 2 years tax returns, 2 months bank statements, 2 months paystubs, and that you have the property listed for sale at fair market value. Throughout the process additional paperwork may be requested. So, be sure to keep everything handy.
Is my information secure?
Yes. I protect your documents and privacy as I would my own.
What is the short sale process?
The process of a short sale is intricate, detailed and time consuming. I’m prepared to take care of all the details for you. You can help me by gathering the required paperwork in a timely manner and “putting on a buyer’s hat” when presenting your home. As your short sale is negotiated, you will be provided regular updates throughout the process.
How long does a typical short sale take?
The short sale time-line is subject to your Lender or Bank. Many banks are overwhelmed right now with short sale requests. However, most do have an understandable review process. Unnecessary delays can be avoided by not sending incomplete short sale packages. Incomplete offers are often passed over or rejected. Your file is then closed and you would have to start over from the beginning. It is very important to be sure you provide everything required by your Lender and requested by the person helping you negotiate.
Can 2nd Mortgages or junior liens be discounted?
Yes, absolutely. In fact, if the first mortgage is being asked to accept a discount, they will require that all other lien holders discount as well in order to give short sale acceptance.
Can IRS tax liens be negotiated?
Yes, absolutely. Tax liens can be released from a property or reduced and paid at closing. Please consult the appropriate tax professionals for more information.
How will I know what is happening in the short sale process?
If you provide an email address that you check daily, you will be sent notification each time something is done to your file, new paperwork is needed, notes are posted, or any progress is made.
Do I need to call my Lender?
You are not required to call your lender, however, it is helpful for you to stay involved with the process and let the bank know that you are serious about closing this transaction. I will handle the entire short sale negotiation process with the bank.
What is the foreclosure process?
Please contact Legal Counsel to receive information on the Foreclosure Process.
Will the foreclosure process stop when we submit a short sale offer to the lender?
No. The foreclosure clock will continue to tick. Postponement requests can be made if necessary. Your Lender will only postpone foreclosure proceedings if they are certain a buyer will perform.
When should I list my property?
Immediately. The Lender typically will not stop or slow down a foreclosure unless a property is listed for sale by a licensed real estate agent.
I want my lender to consider the debt paid in full at closing. Can I include this request in the contingency?
Yes. However, not all lenders will honor such requests. I will ensure that a special stipulation clearly defining your request is included in all purchase offers.
Do we have to have a purchase offer to get short sale acceptance?
Yes. Most lenders require that a short sale offer be submitted before they will even accept a short sale package, order an appraisal, and make their review. They typically will not spend the time and resources to review your situation unless they know that a buyer will perform.
What do I need to do to help sell the home?
Keep the home show-able, stay in communication, be available to review or sign paperwork, support any of my marketing efforts, and keep the utilities on for Buyer inspections.
I cannot afford to make any repairs…!!!
All properties are sold As-Is and require the buyers to sign an addendum stating that seller will make no repairs to the property.
Can an immediate family member buy the home and I stay living here?
Typically not. The foreclosing lender will not allow anyone to purchase the home through which you could become a direct beneficiary of the property and potentially re-sale for a profit. Furthermore, by allowing you the privilege of a short sale you are required to relinquish all use and benefit associated with the property.
My situation has changed and I am making enough money to rent but not enough to pay my full mortgage, but I still need to do a short sale to sell my property. Should I save the extra money?
Yes, absolutely. You will need money for moving expenses. Also, in some rare instances you can offer a good faith payment to your lender to encourage them to approve your short sale.
Can I make any money on the short sale of my property?
A homeowner cannot accept money from the sale of their home if a Lender accepts a short payoff or a short sale. However, there are exceptions to this statement; for example an FHA (Federal Housing Authority) insured loan will allow a homeowner to receive up to $2,500.00 when taking a short payoff.
Will I need to bring money to closing?
In most instances you will not. A short sale is designed to assist the homeowner. All items due and payable at closing are meant to come from the Buyer’s funds. You will generally not have any out-of pocket costs to pay real estate commissions, closing costs, or any other items due and payable at closing.
I may file bankruptcy. Will this affect the short sale?
Yes. If you file for bankruptcy protection you Lender or Bank will be unable to discuss the terms of your short sale until the bankruptcy is released or discharged. A bankruptcy puts an “automatic stay” on any credit card or debt collections which include negotiating a short-pay of your mortgage(s). Any pending foreclosure sale dates will be postponed as foreclosure is also a credit collection. Be sure that you inform your agent immediately upon making this decision. If you choose to file, please provide your agent with any paperwork involving the property that you receive from the Lender of bankruptcy trustee. For further information, please consult with a bankruptcy attorney.
Will filing bankruptcy STOP foreclosure?
No. Filing bankruptcy will not stop the foreclosure process, just delay it. The property will eventually be out of bankruptcy protection and be back in the foreclosure process where it was when bankruptcy was filed. For further bankruptcy information, please seek the advice of legal counsel.
How does a bankruptcy affect my credit?
Bankruptcy will stay in your credit reporting agency files for ten years. Declaring bankruptcy doesn’t necessarily mean that the door to future credit will be forever closed to you. If you take the proper steps after declaring bankruptcy and also manage your credit responsibly, you can rebuild an improved credit reputation in a few years. Please consult a credit counselor or a major credit bureau for more information.
What happens if the Bank or Lender counters the current offer?
The Buyer will need to either increase their offer to meet that number or your agent will need to find another buyer that meets your Lender’s requirements.
How many years after a successful short sale can I buy a house?
There are new loan programs designed to help people who have recently had to short sale their home. You can apply for a home loan in as little as two years provided you have maintained your credit with good payment history, kept your debt-to-income ratios within lending guidelines, and have verifiable income.
If I let the bank foreclose on my house, how long until I can purchase another property?
Unfortunately, there is no specific answer except to say that it could be a considerable amount of time – much more than the 2 years on a successful short sale. Most lenders view your financial history as an indicator of what you will likely do in the future. If you missed several months of mortgage payments leading up to your foreclosure, then a lender will see you as a likely candidate to default on a future loan — in other words, you are a big risk.
Will the Bank or Lender pursue a deficiency judgment for the amount they lost from the short sale?
Your lender can pursue a deficiency. This does not mean that they will. I always attempt to negotiate that your lender(s) consider the debt settled or satisfied and paid in full.
What if my lender requests a promissory note or money at closing?
Your lender can make such requests. Whether or not you choose to agree must be a personal decision based upon your financial situation. Keep in mind that any amount requested by your Lender or Bank will likely be much less than they could potentially pursue from you as a deficiency judgment if the property were foreclosed upon. If they do request a promissory note, it is usually an unsecured one.
What about the new federal government Bailout plan?
To determine your eligibility, please visit: www.financialstability.gov
I am behind on property taxes…!!
These can be negotiated into the buyers offer and paid at closing. The payment of taxes owed will simply be another reduction in the amount paid to your Lender. Please note: if the Lender forecloses on your property, this is an expense they will have to pay.
I have not paid my HOA dues…!!
Several lenders are NOT paying the HOA dues or transfer fees and requiring that the Seller come in with these costs at closing. I recommend that you keep your HOA dues current at all times.
Can I rent the property?
I cannot advise you whether or not to rent the property. Keep in mind that if you are not paying the mortgage payment you should not be profiting from rental payments. If you chose to rent the property be sure to keep accurate expense records and put all rents earned in escrow. If you are not paying your mortgage, those rental payments are owed to the foreclosing lender(s). Please consult a real estate attorney before making this decision.
The property is vacant. Do I have to keep the utilities on?
Yes please. The buyers have the right to have the home inspected therefore you must make arrangements to have them turned on for the buyers inspection.
When should I move out?
Different loan types have requirements regarding occupancy that could affect your eligibility for a short sale. Before making the decision to move, be sure that you have talked with your agent and your Lender about your plans.
Can I take anything with me?
Anything that you are going to take from the property needs to be clearly disclosed to any Buyers viewing the property. Be sure to leave all fixtures that traditionally remain in the sale of most homes and leave them in working order.
The property is in bad condition…should I do anything?
Extensive repairs or clean-up will be considered by potential buyers and reflected in the list price. Should some clean-up be necessary to assist in the sale of the home, I will make that request and work that out with you.
What will happen if I do nothing?
If you do nothing and are not making your mortgage payments, your lender will foreclose. You will have a foreclosure on your credit report, be liable for any deficiency, and/or subject to a taxable event.
I’m “upside-down” in my property. Can I do a short sale?
Yes!! In many cases, a short sale is necessary in order to get you out from under your mortgage debt. By doing a short sale, you will be able to take a large bite out of the money you owe to your mortgage company, so that you are no longer liable for the entire amount. You need to have some sort of hardship, here are some qualifying hardships that I see – do you fit into any of the following categories:
- Mortgage rate adjustment
- Increase in monthly expenses
- Need to relocate for a job transfer or other reason
- Reduced Income
- Health issues
- Separation or Divorce
- Medical Bills
- Business Failure
- Business cutbacks or downsizing
- Death of a Spouse
- A verifiable reason that you are unable to make your mortgage payment
Actually, I’m upside down on my primary residence, 2 investment properties, and even on my 2nd home! Can I short sell them all?
YES!!! It’s a common misconception that people think they can only short sale their primary residence but this is not true! You can do a short sale on your primary home, all of your investment properties, and even on your second home.
Not only am I behind on my payments but my property is set for foreclosure really soon! Can I do a short sale now or is it too late?
It’s probably not too late! I have postponed foreclosure dates in order to help my clients with their short sale hours before the actual foreclosure auction! You’ll need to call me ASAP if you have a pending foreclosure looming as I need to gather some paperwork from you and fast!! Where there is a will, there is certainly a way!!
I have 3 friends, 2 neighbors, and 1 relative in real estate. Can they do this short sale for me?
Although there are a lot of agents out there licensed to sell your property there is no guarantee that they are qualified to do a short sale transaction. Actually, most agents DO NOT KNOW how to complete a short sale and unless they are experienced and have a proven system to get it done, you simply are not getting the proper representation. I am a professional short sale expert with the time, patience, and understanding as well as a system to get this deal done and I even accept referrals from other agents to do their short sale deals!
How much do you charge to do this Arizona short sale for me? Any chance it’s free?
Well, actually yes it’s free – to you! My commission is paid by the bank.
All right, let’s short sell my Arizona Home! How long is this going to take?
It all depends…although short sells definitely take longer than the typical 30 day real estate transaction I am seeing average times from contract to closing around the 75 day mark. Some deals a little less, some are a little more. I believe I have perfected my short sale system and make every attempt to make this transaction and clean and as quick as possible.
But I heard about some possible tax issues??
You should be aware that on January 1, 2013, mortgage debt that is forgiven will be treated as income and be subject to federal and possibly state income tax. However, I am not a tax attorney or CPA. I highly recommend that you contact your favorite tax professional and real estate attorney for concrete answers to your specific situation. I can give you referrals if needed.
What about my credit score?
Please contact the credit scoring agencies and your favorite attorney for more information on how a short sale will affect your credit score. Most credit experts that I have spoken with have agreed that, although a short sale will probably affect your credit in some way, it will not affect it badly as a foreclosure. It is my goal to try and keep a foreclosure from haunting your credit for years to come.
When can I buy another house?
Under the new Fannie Mae guidelines you will be eligible in 2 years for an institutional loan. Having a foreclosure will require 3-5 years before you can obtain that loan.
Can the bank come after me?
Another question better answered by your favorite attorney. I can tell you that Arizona is a “non-judgment deficiency state” but please ask your attorney for a more detailed explanation.
Why would the bank agree to take less than I owe?
Banks are in a difficult situation in this economy. It costs them much more time, energy, and more importantly MONEY to foreclose on your home. They then have to try to sell it and probably end up with much less than they would get from a short sale, and have to deal with managing the property, bringing in third party contractors, agents, appraisers, etc. With qualified short sale professionals like me negotiating for you we can usually come to an agreement that a short sale is best in both parties’ interest.
IF YOU HAVE ANY ADDITIONAL QUESTIONS I AM HAPPY TO ANSWER THEM FOR YOU. CONTACT ME NOW AND I’LL BE HAPPY TO ASSIST YOU.
Contact me immediately and I’ll conduct a discrete and confidential interview with you via phone regarding your Arizona Short Sale situation. I can usually be up and running with your short sale on the market in just a few days. Call me at (602) 320-4253 or email me at JPCook@JPCookAz.com. I am excited to have the opportunity to help you find some peace of mind!