short sales

What is a short sale?
In simple terms, a short sale is a special transaction where a lender agrees to accept less for a property than is actually owed on it.

Do I have to be approved by the lender before putting the property on the market as a short sale?
No. Technically speaking there is no such thing as being “Short Sale Approved”. The bank does not approve the short sale until you have an accepted written offer. A Certified Short Sale Specialist can help you navigate the complex process of complying with the lender’s requirements.

Why do I need a Short Sale Specialist?
Every lender is different. Some are very open to helping you with a short sale and others won’t even talk to you. Negotiating a short sale with a lender can be a complex process. Having an experienced Short Sale Specialist can make all the difference between having your deal rejected or approved. They truly provide a very valuable service.

Is there a lot of paperwork or “red tape”?
Yes, there could be. If a Short Sale Packet is not complete when it is submitted to the lender, the lender very likely will not approve your buyer’s offer. A Short Sale Specialist is trained to guide you through the process and make sure all required forms and documents to be submitted are complete.

I have a friend who is a real estate agent? Can I use him/her?
This is a very specialized field. Very few agents have the expertise to handle this specialized type of transaction.

How does the Short Sale Specialist get paid?
The lender will usually pay the commission as well as the closing costs too.

What if I have no equity?
You may still qualify for a short sale.

What if I have more than one mortgage lien on the property?
Most short sales do involve a first and second lien holder. Both of your lenders will need to be satisfied in some way to complete the short sale. A Certified Short Sale Specialist will help you negotiate acceptable terms with both lenders.

Why would a lender agree to a short sale?
Because it is ultimately in the lender’s best interest to do so. Lenders have had to develop strategies to quickly liquidate non-performing loans in their loan portfolios or face penalties imposed by the Federal Reserve and banking regulators. The short sale also allows the lender to avoid the costly and time-consuming process of foreclosure.

I pay mortgage insurance. If I default on my loan, will the mortgage insurance cover the deficiency amount?
No. This is a common misconception. Mortgage insurance is not there for your protection. Mortgage insurance protects the lender if the borrower defaults on the loan.

Do I have to miss a payment to do a short sale?
No. Just recently most major lenders started accepting short sale offers from sellers who have never missed a payment.

I just missed a loan payment and I know I will miss the next one. How long does a foreclosure take? Is there still time to do a short sale?
The foreclosure process varies from state to state. In Illinois, a foreclosure can take up to a year. Generally speaking, a well priced short sale can sell and close in about 120 days.

What if I’m already in foreclosure, can I still do a short sale?
Yes, possibly. The foreclosure process can take about a year in Illinois. The short sale allows the lender to avoid the costly and time-consuming process of foreclosure.

Will my friends or neighbors know?
The short sale is private, unlike a foreclosure which becomes public record.

Will I have to pay property taxes if I do a short sale?
Property taxes always have to be paid. However, whether the lender pays them or the seller depends on each lender’s policies and the specific agreement reached during the short sale negotiations.

What are the tax consequences of a short sale?
The Mortgage Forgiveness Debt Relief Act of 2007 did away with much of the tax consequences for a short sale of a primary residence. Under this new law, up to $2 million of qualifying mortgage debt forgiven on the taxpayers’ principal residence in 2007, 2008, or 2009 will not be treated as income for the taxpayer. The limit is $1 million for a married person filing a separate return. The Act applies only to principal residences, not vacation homes or investment property.

What about my credit?
A short sale may or may not show up on your credit report. A lot depends on your lender. In a short sale, Eldorrado Chicago Real Estate will seek a full release of liens and request that the lender consider the mortgage debt settled. If the lender reports the debt as “Settled Debt”, the long term effect is much less harmful to credit. Since each lender involved in a short sale is different, a credit bureau is the only true source of information for determining how a short sale or a foreclosure is going to affect a homeowner’s credit.