What is a Short Sale?

Short sales are on the rise as foreclosure rates continue to mount in the Washington DC Metro Area. Why? Because a lot of homeowners and investors, who have fallen behind on their mortgage payments and have seen the value of their homes, drop below the purchase price, are turning to short sales as a way to avoid foreclosure and unload their properties

In a short sale, simply the owner of a home and their mortgage lender agree to sell the home at a discounted price. The “Shorted” amount equivalent to the difference of the sales price and the original note is what the lender(s) will have to agree before a sale occurs.


Why Should You Choose A Short Sale?


For you, as the homeowner, there are three (3) big advantages to a short sale:

#1 Short sales appear on your credit report as "pre-foreclosure in redemption," not as "debt discharged due to foreclosure"; a short sale will not damage your credit, as much as a foreclosure would.

#2  Unlike a foreclosure, in which the lender takes ownership of the property and then sells it, with a short sale the owners sells the property with the help of a Realtor. You have more control of the property until it exchanges hands.

#3 Another big advantage is that you avoid a foreclosure altogether and can possible be back to normal in about two years


How does Herboso & Associates get paid?

We will negotiate directly with the bank for all real estate agent commissions. In most cases, the bank will offer the listing agent a smaller than average fee for performing the marketing and negotiation responsibilities associated with representing a seller. Regardless of our actual commission, Herboso & Associates will provide our short sell clients with the full service and marketing dedication that we guarantee to all of our loyal clients.


How Long will it Take?

 

The short sale negotiation process is a lengthy one. Sometimes it  takes several weeks to before a lender, the home owner and the buyer can agree on acceptable terms. Many lenders have a lot of red tape and thick layers of bureaucracy, insurers and investors will have to be dealt  in order to get your short sale approved. We understand how painful your financial situation may be, so we make a special point to communicate with our sellers on a regular basis as we go through this grueling process.

But My House Is Going to Foreclosure, Will I have Enough Time?


Starting a short sale will not automatically stop the lender from starting the foreclosure process. However, we have successfully convinced lenders many times before to postpone a foreclosure while we negotiate a short sale. While there are no guarantees, we will do everything that we can to get the Lender to accept your short sale package so they can stop the clock on the foreclosure of your home.

Can I Stay in the House?

You may stay on the house until the Sale is completed. As soon as the new buyers take possession of the title in the property, you will have to leave.
We help you prepare for this with sometimes months of advance notice for you to start looking for a place to live. We will help you on this as well.



How Do I Know This Will Work?

 

You don’t. .and we don’t. Be extremely cautious of anyone that will offer you guarantee that they will be able to negotiate a short sale. We can not make any promises to you that a short sale will work.. .as a matter fact, no one does. .  Once you missed a payment, the lender is in charge and can proceed with foreclosure if they decide to pursue that option. Just bear in mind that in the current real estate market, lenders are aware that they might have a better chance of selling a home via short sale instead of reclaiming the property in a foreclosure.



Will I Get Any Money From the Sale?


No. A universal requirement of the lenders in granting a short sale is that the borrower will not get any proceeds from the sale of the property. The lender is going to take a huge loss on the home loan. .they will not let you get any money.


Can I sell it to my own relative?


No. Another universal requirement of the lenders in granting a short sale is that the borrower(s) will not and can not benefit form the sale of their property in a short sale. A relative purchasing will not assure the bank of a transparent transaction.  



What Happens if This Does Not Work?


You may still have other options before the foreclosure occurs. We will direct you where to go. .if we know that your lender is simply refusing to do a short sale.


Will This Have Any Impact on my Taxes?


On December 20th, 2007, President Bush passed “The Mortgage Forgiveness Debt Relief Act of 2007” which allows” if you sell your home as a short sale by December 20th, 2010, the loss the lender takes will not be considered taxable income by the IRS. One of the main requirements is that your property must be a primary residence.

The IRS requires you to report the sale of any property at the end of the tax year. Please check with your accountant so he can note on your taxes about “The Mortgage Forgiveness Debt Relief Act of 2007.”



What type of paperwork do I need?

The lender will require a view of the financial package that usually includes:

A Listing Agreement
An Offer of purchase
(2) Months’ bank statements
(2) Months’ pay stubs
(2) Years’ IRS tax returns
A Hardship Letter
A Full Financial Statement

The leading cause of delay and even denial of an offer to the lender is caused by a Realtor’s inability to understand this process. We advocate this in many of our training for Realtors and have full knowledge to what banks need and want for a short sale to be approved.
The short sale package is the key that set us apart form other companies doing short sales.

 
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