SHORT SALE VS FORECLOSURE
THE GUSMAN GROUP
Foreclosure & Short Sale Specialists
​Short Sale Information
Posted on March 9, 2012 by Jerry Gusman Short Sale Agent
Questions and Answers that may help you decide if a Short Sale is for you:
What is a Short Sale?
This is when a homeowner owes more on their property than the property is actually worth but their bank agrees to accept less than what is owed as “payment in full.�
Why are banks willing to do a Short Sale?
Because the alternative is foreclosure and the foreclosure process is usually far more costly than the discount the bank takes on a Short Sale.
What are the benefits for the Homeowner in a Short Sale?
The primary benefit to a homeowner who participates in a Short Sale is avoiding the devastating effects of a foreclosure on their credit and the stigma of the word “Foreclosure.� If the loan is a VA guaranteed, the successful completion of the short sale protects their VA eligibility for future VA mortgage loans.
Are there potential tax ramifications to the homeowners for doing a Short Sale?
When a lender accepts a Short Sale they are canceling or forgiving debt. The IRS considers this cancellation or forgiveness of debt to be taxable income. In order to be in compliance with the IRS rules, lenders are required to issue a FORM 1099-C for the amount of the debt cancelled or forgiven. BUT WAIT THERE IS SOME GOOD NEWS. On December 20, 2007 new legislation went into affect known as the “The Mortgage Forgiveness Debt Relief Act and Debt Cancellation� of 2007. There are some provisions to this bill and we advise you to find the relevant information by visiting the IRS and Franchise Tax Board websites for detailed information on The Mortgage Foregiveness Debt Relief Act and Debt Cancellation.
The IRS does not require you to pay taxes if you are insolvent which means your debts exceed the value of all your assets. Most people who are considering a Short Sale have this situation. Please refer to your CPA or accountant for more information or go to theIRS website.
What is the impact on the homeowners credit for doing a Short Sale?
A Short Sale is reflected on the homeowners credit report as something to the effect of: Discounted payoff, paid-in full, compromised sale and satisfaction of mortgage. A Short Sale is far less damaging to the homeowners credit than a foreclosure or deed-in-lieu of foreclosure. See Chart.
What closing costs will most Short Sale lenders cover?
As part of the Short Sale the lender will cover most of all the closing cost on behalf of the homeowners as well as the broker commissions. There are few closing costs that the lender will not cover on behalf of the seller such as the cost of a home warranty if requested by the buyer, termite and buyers related closing cost.
Can I do a Short Sale if I am current with my mortgage payments?
The answer is YES. If we can show true hardship, how the payments have been made and why we anticipate they will be late . . . lenders will accept the Short Sale, however there is no gurantee. It will vary person to person.
Is there a monetary incentive for the seller in participating in a short sale?
Given that the lender is taking a financial hit in a Short Sale, they want to make sure that the homeowner does not benefit monetarily from the transaction. However, if the loan being shorted is an FHA and comes under contract and closes within 90 day Pre-Foreclosure sale period, FHA offers $1,000 seller incentive to the homeowner at closing. If the property comes under contract within the 90-Day period but closes after that, the lender typically reduces the seller incentive to no more than $750.
What are the most common set-backs in a Short Sale?
 Working with an inexperienced Agent or Escrow Officer
 Various judgments attached to the property
 Clouds on title
 Disconnected utilities
 Inexperienced banks and turn time for response
What if the property is already scheduled for FORECLOSURE?
Foreclosure periods are different from state to state. Most lenders will postpone the Auction/Sale date provided they have an offer and a complete Short Sale package. We have many Short Sale properties pulled from auction within a few days so it is always worth a try.
In California these are the stages:
 Payment Default
 California Notice of Default
 California Notice of Trustee Sale
 California Auction
 Property Sold
 Trustee Deed Upon Sale of the Pre-Foreclosure Process
What if there is a 2nd or 3rd mortgage lien on the property?
We negotiate with each lender seperately and it is not uncommon for the 1st to make an offer to the 2nd or 3rd to obtain a lien release for the property to sell.
Are there advantages to a foreclosure?
I have yet to hear of any. If you are advised by an agent to let your property go to foreclosure I would seek the advice of an attorney before taking such a drastic measure.
Why is it important to have an Experienced Agent and Escrow Officer closing your Short Sale?
The banks are overwhelmed with many incomplete files that are clogging up the system. This consequently will delay the process or you will receive a denial on your Short Sale. The banks are also experiencing a turnover in these departments and are finding themselves retraining people, which means they lack experience in successfully closing short sales. An Experienced Executive is key to the success of your Short Sale.
Why use our services for your Short Sale?
We are CDRS and SFR designee’s. That means we are Certified Default Resolution Specialist a designation that requires extensive training and Short Sale and Foreclosure Resouce designation that is obtained by the National Association of Realtors completing a course of understanding both the buyer and seller side of Short Sales and foreclosure transactions. These designations have prepared us in helping direct distressed sellers make the right decisions to safeguard their families financial future. Here is how we can assist:
 Qualify sellers for Short Sales
 Prepare Short Sale packages
 Negotiate with lenders
 Resources to Short Sale challenges
 Utilizing systems implemented by major banks and investors
 Options not exposed by other agents
How do you know if you qualify for a Short Sale?
By calling our office we can tell you over the phone quite often. Or simply fill out the form below and one of our Experienced Short Sale Experts will analyze your situation and call you immediately to discuss your options. We have Certified Short Sale Experts that have extensive education and training on analyzing the file. The multiple Short Sales they have handled give them the experience needed to negotiate on your behalf.
SHORT SALE WITH US AND RECEIVE A $1,000.00 SELLERS BONUS!
