North Idaho Short Sales Frequently Asked Questions
Q. What is a Short Sale?
A. A short sale in real estate occurs when the outstanding obligations (loans) against a property are greater than what the property can be sold for. Short sales are a way for homeowners to avoid foreclosure on their homes and still be able to pay off their loan by settling with the lender.
Q. Do I qualify for a short sale?
A. Lenders vary in their requirements. Your first step should always be to contact your lender. However, most lenders require the following:
Your payment is delinquent or is about to be. Most lenders will not work with homeowners who are successfully making their loan payments. Each lender policy is different, so if in doubt, check with your lender.
You have a qualifying hardship. Examples that qualify are divorce, loss of a job, medical bills, etc.
You have no other major assets. Lenders who see homeowners with large bank accounts or assets are less likely to cooperate on a short sale.
Q. How long does it take to do a short sale?
A. There are several stages that are involved with the Short Sale process which can be lengthy. Let's examine them:
The first stage requires working with you as the homeowner to gather all the required documentation that your bank will require to us to send them. This stage shouldn't take longer than a few days. Please review the section on short sales for required documentation.
The second stage involves us preparing the listing paperwork and scheduling an appointment with you to see your home and prepare your home for the sale. This stage only takes a few days as well.
The third stage involves aggressively marketing your home for sale and producing a ready, willing and able buyer. This stage can take as little as a few days or as long as a few months. We will closely track the activity of your sale and make the necessary pricing adjustments to attract your buyer(s).
The fourth stage is the actual presentation of the offer to your bank. This is where our expertise and experience in negotiating Short Sales takes place. The negotiation and approval process can take anywhere from 30 to 120 days. In most cases, 60-90 phone calls and faxes back and forth between the lender and our team are required. If we are dealing with a single lender rather than multiple lenders, it is easier (although not necessarily faster) to obtain the approval.
The fifth and last stage to the Short Sale process is the period of time between Short Sale approval from the bank and the buyer closing on the home. Although the Short Sale addendum states the close will occur 30 days after bank approval, be aware that the banks typically push for a 2-3 week close. When possible we encourage all parties to accommodate the bank on this issue.
Q. How do I begin a short sale?
A. First, call your lender. Make certain that your lender will work with you on a short sale. The thing to focus on is that the lender is facing a choice between foreclosure and cooperating on a short sale. That is the issue and that should be the focus of any conversation.
Next, complete your paperwork as listed in our Mortgage Relief Package on the page titled "Seller Overview of Homework Needed". Once that is complete, contact our office. We will take it from there.
Q. What if I don't have any money to pay Realtor commissions?
A. In a Short Sale transaction you, as the seller, do not have to pay the Realtor commissions or any of the closing costs. The bank covers these costs. The banks will also pay for any unpaid taxes on the home. We recommend you continue to make your HOA payments. Many real estate agents charge up front fees to the seller to take a short sale listing. We are one of the few who do not.
Q. Are there any tax ramifications to a Short Sale? Any credit ramifications?
A. Please see the IRS FAQ's included in our Mortgage Relief Package regarding tax ramifications. As always, we recommend that you seek legal and tax advice before any decision to do a short sale or before foreclosure. Both paths have potential legal, tax and credit ramifications.
Q. Why do banks agree to a Short Sale?
A. Generally, banks have found that it is more cost effective to do a short sale rather than foreclose on a home. Banks are not interested in owning real estate. While banks do take a loss on a short sale, foreclosing on a home can cost the bank an additional 10% - 20% more.
Q. I am behind on my payments. How long until the bank forecloses?
A. It varies. Most notes (the I.O,U. that you signed when you took out the loan) give the bank the right to file a "notice of default" as soon as you are 30 days behind on your mortgage. While they have this right, most lenders do not file for a "trustee's sale" (the legal process to foreclose) until you are 90 days or more delinquent. From the date of filing for a "trustee's sale", there is a minimum of a 120 day period of time between filing and the actual "foreclosure sale" or "trustee sale".
Q. When should I start the short sale process?
A. The sooner the better. Once you can no longer pay the monthly mortgage amount and if you do not wish to pursue any other lender remedies (loan modifications, etc.) begin immediately. The more quickly you act, the better the odds for a successful short sale.
Q. Do all short sales get approved?
A. No. We cannot guarantee that we can close every short sale. But we can assure you that if it can be done we will do everything in our power to get it approved. Sometimes the banks have inflated ideas about market value, second noteholders refuse to settle, or the lender will not halt a trustee's sale.
Q. I haven't filed taxes for last year. Can I still do a short sale?
A. Yes. Understand that the more missing pieces, the tougher the approval process. But we have included waivers for any documentation that is unavailable. We will submit the waiver in place of the required paperwork This should not be used as a substitute however, for any available documentation. The more fully we provide documentation, the quicker the process and the greater the likelihood that the short sale will be approved.