Short Sale Frequently Asked Questions

So what exactly is a Short-Sale?

A short sale is simply the process by which the homeowner(s) can sell a property for a lesser amount than what they owe the bank on all outstanding mortgage(s) combined. The beneficiaries of the mortgages, in this case the lender or bank, will have to be convinced to lower the mortgage balance(s) to approve the short sale. In order for all of this to take place, a compelling and very well prepared short-sale request package is presented to the bank for their review and approval.

The lender or bank would have to agree to take a loss (write-off) on the mortgage(s) because the value of the home has fallen well below the outstanding mortgage balance AND the homeowner is also insolvent, not in good financial health, and keeping them from continuing to make payments on the mortgage(s) on time.

Once the bank approves the short-sale by discounting the balance of their mortgage, the property can be sold for a lower price not requiring the homeowner/seller to bring in dollars to cover the shortage. The mortgage(s) are re-conveyed (satisfied) and the process of foreclosure stops.

What circumstances are Short-Sales used for?

For the most part (but not in all cases), short-sales are associated with properties that are in foreclosure. What this means is that the homeowner(s) should be at least 3 months behind in their payments and foreclosure proceeding has been filed by one of the lenders. More recently, those mortgages that are now behind or "in-default", these are now considered potentially short-sale transactions without the properties actually being in foreclosure.

In these situations, the homeowner(s) typically have NO equity left in their home. For example, the total balance owed on the mortgages is equal or greater than the market value price at which the property could be sold. This example is more prevalent on those properties that were not long ago financed using 100% mortgages (the no money down programs), additionally, the recent decline in property values has made this situation even worse. In the Southern California area, property values have declined 15% to 30% in fiscal 2007.

Additionally and in most cases, the homeowner(s) are expected to prove some level of financial hardship preventing them from continuing to make loan payments. Some of the more common hardship cases are due to employment, health and medical bills.

Here is one of many scenarios of a short-sale:

The homeowner buys a home for $600,000 in 2005 using a 95% CLTV program (5% down), the purchase money combined loan balance of $570,000.

Twelve months later, the property is appraised 18% higher and with lower market interest rates, the property owner moves to refinance taping his newly gained equity and pulling some cash-out. The property value is now $708,000 with a combined new 1st and 2nd mortgages totaling $708,000, exactly the same amount.

Moving forward to 2007, now the property owner has some health issues, leaves his job and keeps making the mortgage payments from his savings and retirement reserve accounts in hopes to return to normalcy quickly.

Eight months later with savings reserve accounts depleted and not back at work yet, the property owner misses his first mortgage payments, then makes a decision to sell his home thinking that an asking price of $708,000 can bring in a buyer.

Months pass. With decreasing home prices, increasing inventories and no real offers in sight, the property owner grows very worried as his home is now valued at just over $650,000. Foreclosure is now lurking around the corner. The local Realtor suggest the homeowner to reduce the asking price in an effort to attract a buyer, but the issue now is the Seller having to bring cash to escrow and cover the mortgage shortage.

As time passes by and with the foreclosure moving along, the Seller feels depressed, helpless and not in control.

By now, if unfortunately you find yourself in similar circumstances, you may want to consider and explore taking advantage from a short sale. Please don’t hesitate to email me at Armando@PrimacyRealEstate.com so we can discuss a possible solution for your situation before it’s too late.

What are some of the benefits a Short-Sale solution has to offer a property owner?

Mainly, a short-sale solution eliminates the enormous pressure and anxiety of going through a foreclosure process, and not to mention the potentially harassing telephone calls from the lenders. The property owner can focus more on their lives and family also ridding themselves from the unmanageable mortgage payments. Your entire family gets a chance at a fresh start and they are tremendously thankful to you for getting the needed relieve and are no longer burden from all the stress.

Additionally, a short sale solution also avoids further damage to your credit and a shorter time to recovery to you and your family. Remember, late mortgage payments and notice of default has already impacted your credit and your future ability to obtain preferred financing. By stopping the foreclosure process, you have prevented further damage to your credit and a much lower your credit score. Short sales results in the pay-off of your mortgages leaving you a positive mark in your credit profile as opposed to the many negative ramifications resulting from a foreclosure.

One last comment, please be aware that there are no out of pocket costs associated with a short sale to the property owner, they walk away for free.

So who owns my house after the Short-Sale?

Simple, the new purchaser of the house is the new owner after a short sale and that entity has the full legal rights to occupy, convey, transfer, encumber, etc. the property purchased. A short-sale, other than the bank accepting a lesser amount than what they’re really owed, it is a considered a normal sales transaction. Once escrow is closed and the bank is paid-off, unless the new owner leases or rents the home back to the seller, that previous property owner would have to vacate the premises.

Why would a bank or lender consider accepting a Short-Sale?

As may already know, banks are in business of taking in deposits, paying you a small yield a then lending a percentage of those deposits at a higher interest rate in the form of consumer loans and mortgages. They have little intention of ever owning any residential real estate. Foreclosure is a complicated long process that cost anyone a lot of time and money, if a bank forecloses, those properties are considered ‘non-performing assets’ weighing down the company performance. Most banks have restrictions to the amount of ‘non-performing assets’ they own and once this level is reached, they quickly act to sell off those non-performing assets at significant discounts to be back in line with those established guidelines.

A bank avoiding a foreclosure process and opting to accept a short-sale, the latter saves then the enormous costs associated with the foreclosure. Some of these expenses are; Attorney fees, delays from borrower bankruptcy, damage to the property and maintenance, resale costs including sales commissions, property taxes and insurance, etc. all of these fees are usually ultimately paid by the bank during a foreclosure. The short-sale offers the banks the option to cut their losses early by getting those properties off their books much faster.

As the potential for an increase in overall real estate market deterioration, the banks are more than ever willing to consider the short-sale as a sound business solution to this current problem.

Is a Short-Sale a realistic solution to save my house?

The purpose of a short-sale is to simply provide a remedy and solution for the mutual benefit of both the property owner and the bank by allowing the property to be sold through a bona fide sale to an unrelated buyer. The bank realizes the benefit of lowering potentially significant additional holding costs of the property as an REO (Real Estate Owned) while the property owner also benefits by the bank accepting a lesser pay-off offer of what they’re actually owed on the mortgages. The property owner naturally will not be allowed to stay in the home once escrow is closed as ownership title is passed to the new buyer.

Property Owners Beware! While in default, you will unfortunately receive a lot of mail from ‘so called’ investors with offers to save you from foreclosure and ultimately losing your house. For the most part, these offers are very risky and seldom work to your advantage, often times leaving you in more trouble than before. If I may recommend, please DO NOT ever give anyone any advance payments or fees for their services and by all means, DO NOT deed your property away at the last minute to someone that offers to save you from the foreclosure and the Trustee-Sale. If it sound too good to be true, It is probably a scam.

For additional information and examples of some of the most commonly used scams in this industry, please read this. Be informed and take action!

If I short-sale my property, how would it affect my credit?

By selling your property via a short-sale, you have a much better chance at “credit-damage-control” by avoiding a potential foreclosure. When the property owner fails to make the mortgage payments on time, the banks usually report this information very quickly to the credit agencies becoming negative remarks and a part of your credit payment history. A short-sale cannot reverse that, unless you’re able to negotiate the reporting of those late payments with the lender. Banks are sometimes willing to change how your credit is reported. Remember, everything can be negotiated in a short-sale and you’re actually helping the lender, in a way, from acquiring a “non-performing asset” as these are not viewed positively by their banking regulatory agencies. An added benefit to maintaining good credit and opting for a short-sale is that you will NOT end up with a foreclosure remark in your credit as this is most definitely worse than potentially only having some temporary mortgage late-payments reflecting instead.

If by chance you end up in bankruptcy, that is probably the more damaging remark in your credit profile and will remain there for several years, you will also face many difficulties in obtaining any type of future consumer credit. The short-sale solution will help you avoid all of this and the key is not to wait.

We’re in the foreclosure process now; can we still do a Short-Sale?

Most foreclosures situations are a little different and each should be evaluated in their own merit. Below are some guidelines:

1. Is the property now in foreclosure and all loans in default?
2. Is the property owner currently in a verifiable personal financial hardship situation?
3. Does the property have little or no equity considering current market values and condition?
4. Are you at a minimum 60 days away from the eviction date?

You can e-mail me at Armando@PrimacyRealEstate.com to see if a short sale is right for you. Or click HERE to fill in some more details about your particular situation.

If I’m NOT currently in foreclosure and have yet to miss a payment, is a short-sale an option available to me? Does my situation qualify?

The short answer; It is very difficult to get a bank or lender to agree to a short-sale if foreclosure has not been filed, however, it is very possible if there is a good hardship story well documented. The bank or lender must feel convinced they are NOT GOING TO BE REPAID on the loan(s) unless they do a short-sale.

As indicated before, each situation is different and the financial hardship must be legitimate, it will be verified. Please don’t believe that doing a short-sale will be the easy way out from poor decisions or a bad investment. If you remain gainfully employed and your property simply lost some of its recent value, this is NOT a very good reason for a bank or lender to accept your short-sale request. It just won’t fly and you will be expected to continue to service the debt (make the mortgage payments).

If the financing is not Conventional, but FHA, HUD, or VA, can we still do a Short-Sale?

The process is very much the same and only differs slightly in the approval process. Short sales can still be done in all types of mortgages but past experience and knowing what to do help to get these deals done in most cases. Please visit our Short-Sale interview evaluation Form to get the process started.

Who pays the back property taxes I owe the county if I was to do a Short-Sale?

In a normal property sale transaction, the property tax is in all cases is the responsibility of the homeowner until the date the escrow is closed (the recording of the note and deeds of trust). After that date, property taxes become the responsibility of the buyer.

When property taxes remain unpaid and/or delinquent, this will have an effect on pending negotiations between the bank and the buyer and it’s very important that you inform us upfront to minimize any delays.

What if I want to short-sale my own house?

Sorry, “Conflict-of-Interest!” and “illegal”. A bank would only accept short-sale petitions as an “arms-length transaction”, period. A property owner cannot remain objective during the short-sale marketing of the property, they cannot sell to family members or friends, and while on the topic of ‘friends’, friends will not be allowed to handle the short-sale for you either.

Once again, during a short sale the bank is considering discounting the loan balance owed them only due to legitimate homeowner hardship situations and NOT so the homeowner can realize a profit. Never, ever can any proceeds (dollars) coming from a short-sale transaction be paid to the homeowner, in this case, the seller. Under no circumstances will the banks allow a short-sale if they suspect the homeowner can profit.

Is it OK for me to contact my bank or mortgage broker to discuss a possible reduction of the outstanding balance of my home loan(s)?

Regrettably, many things have changed over the years and that approach is no longer an effective way to handle this situation in our banking industry. I’ll explain; when a homeowner obtains financing, the loans are bundled in pools worth millions and then sold to Wall Street investors. Unbeknown to most, the company you mail your loan payments to is probably only a “servicing company” and not necessarily the bank (beneficiary) who is owed the money. Simply said, those companies are there only to “service” the loans, collect and correctly credit your payments.

Besides all of the above, once the bank starts the foreclosure process, your file is handed over to their “loss mitigation department so your “bank” or the local branch no longer has anything to do with your loan. From there on, all contact and negotiations concerning a short-sale are handled by the new buyer or investor and the “Loss Mitigator” or “Asset Manager” representing the bank.

Are there any other options available to me at this point?

When a property owner is in foreclosure, there are some things they can do and these are:

1. The property can be marketed via the normal channels.
2. The loan(s) can be brought current by sending the bank or lender the missed payments, late fees and any other penalty access by the beneficiary(s).
3. There is a possibility that the delinquent loans could be refinance with another lender.
4. The property owner could qualify to file bankruptcy (consult your attorney).

We always recommend choosing one of the first two options since these are the most beneficial for the property owner. The other two, well, these are not only more difficult but have more significant negative ramifications for many years to come (refinancing while in foreclosure will just about guarantee you a much higher interest rate while bankruptcy will stay on your credit record for years!).

Reviewing our options; if your property cannot be sold to satisfy the loan(s) owed, and there is no money to bring the loan(s) current, and there is no equity to speak of to possibly be able to refinance, then the obvious choice will be a short-sale before one would consider filing for bankruptcy protection (option #4).

I cannot stress to you enough how important it is for you to quickly educate yourself and learn all your choices regarding your situation. Always seek the advice of a competent real estate attorney, a CPA, and a Realtor you have choices, don’t wait until it’s too late!

One last word of caution; Please be aware of those asking you to pay them a fee in exchange for their advice and services, the so-called “Foreclosure Specialists”. Consider such advisers when it is by personal recommendation ONLY and from a trusted source.

So what do you mean by "Financial Hardship" and why is this so important?

Documenting "Financial Hardship" is a very critical component of the short sale negotiations. Please ignore what you may hear about the banks "not being in the business of owning real estate", etc., they’re not just going to roll-over and give the property owners an easy out. Short-Sales require a GOOD and COMPELLING reason to CONVINCE the banks to discount what they’re rightfully owed. Banks have in-house departments employed with attorneys, specialize industry personnel and including what in this industry is known as the "Loss Mitigation Department". What this means is that they are very well prepared and organized to handle short-sales with the primary goal to minimize losses to the bank by taking on bad loans. By accepting huge loan discounts to investors, this increases their losses and they don't take it very lightly.

Put simply, the solitary reason a bank will ever agree to a short-sale offer is by concluding that the short-sale will cut their losses netting them more money than if they were to move forward with a foreclosure. Having a clear understanding of the property owner's verifiable financial hardship is a BIG part of the “Loss Mitigation Department’s” ability to conclude whether they will be paid in full for the mortgage or not.

IF THE PROPERTY OWNER FAILS TO PROVE A LEGITIMATE FINANCIAL HARDSHIP SITUATION, THE BANK WILL NOT APPROVE THE SHORT-SALE EVEN IF THE HOME IS WORTH LESS THAN THE MORTGAGE OUTSTANDING BALANCE. Simply put, the Bank will require the Trustor (borrower) to pay the entire shortage without hardship.

Contrary to popular belief, property owners and primarily investors who try and manipulate a short-sale in a last ditch effort to get rid of their poor investments are sadly mistaken. The banks are very aware of these situations and will not simply allow it, a waste of time to even try. If you are employed and have some assets, but you have only lost value on your home and now decide to sell, YOU PROBABLY CANNOT SHORT-SALE your property. Additionally, if you are current on your loan payments, again, IT WILL BE VERY DIFFICULT TO CONVINCE THE BANK TO ACCEPT A SHORT SALE OFFER. In almost all cases, you need to show the Bank that you simply cannot repay the loan back and your entire submission package MUST be in order, well documented.

Again, for Primacy Real Estate to try and short sale your home, you need to demonstrate “Financial Hardship” or often times be in default or about to stop making payments on your mortgage. If you don't meet any of the criteria, we may NOT be able to attempt a short sale.

To see if I might be able to help you with your short sale, please e-mail me at Armando@PrimacyRealEstate.com

My house is very nice when compared to others, why is the Short-Sale offer so low?

Most Sellers more often than not, have an emotional attachment to their home and naturally feel a buyer or investor's short-sale offer is always low. It is always important to understand a couple of things. Foremost, let’s remember that a seller involved in a short-sale cannot receive any proceeds from the transaction, and consequently it will be of very little concern at what price the short-sale is agreed upon. Conversely, the exception would be if the seller has a potential income tax liability*. Other than what was explained, the final agreed sales price should not be of great concern to the seller.

Now, let’s get back at the most important reason for a short-sale situation, whether or not the bank will agree to the discounted offered price. Believe it or not, often times, banks do accept discounted prices for short-sales that most property owners and some Realtors are astonished to hear. A loan discounted by 40% is no longer an uncommon event and these happen for a number of reasons:

1. Most Sellers are frequently in disagreement about how terrible the market really is for residential housing and consequently how much the value has depreciated.

2. Banks don't want to deal with a foreclosure any more than you do. Banks will incur substantial expenses during a foreclosure process that can last on average more than 9 months. Considering legal fees, trustee fees, publication and filing fees, lost revenue from non-collected interest on the money they originally loaned and now tied up, the delinquent property taxes, hazard insurance, accruing property maintenance and expenses as well as the very costly potential for vandalism of a vacant home. If we factor in the price a bank may get when they try to sell the property as a REO (Real Estate Owned), then and pay sales commissions to do all that.

In today’s distressed real estate market environment, banks are very aware that a short-sale offer cannot be ignore, it could be the difference between cutting their losses short or an open-checkbook. When considering the average estimated cost for a bank holding a property as a nonperforming asset at over $60,000, then settling on a $50,000 loss though a short-sale, they will be much better off.

3. Banks, like many organizations cannot operate on emotions as a business. Just as any other successful company, they analyze the numbers and simply make an informed decision. In most cases, while analyzing a short-sale, if the offer makes sense, they will accept it even if it means taking large losses. Waiting means wasting money and time, they want to close the books and get the deal done now.

Make no mistake, in a troubled housing market, to these banks, the numbers have very little to do with how nice your home really is, they’re only looking at the bottom line.

* Always seek the advice from a competent CPA who will be able to explain all income tax ramifications.

Can you provide assistance with properties in my area?

Our geographic focus is the Southern California area, however, if we feel that your situation would be better serviced by referring your business to others in a specific area, rest assured that we ONLY refer that business to qualified Realtors with expertise in that segment. As GRI certified, I too seek other Realtors with similar designations and short-sale experience. We work with many other short-sale specialists in many areas and we can certainly help you. In all cases, we need to have some knowledge of the local real estate market in order to prepare a present a convincing case to the lender(s) to short-sale your loans.

How much will you charge me to Short-Sale my home?

We charge you absolutely nothing. Primacy Real Estate will never ask for any money from you in any form, even if your bank fails to approve the short-sale offer. If the short-sale offer is approved, your bank will also have to approve the listing or sales commission. This is never paid by the homeowner.

Do you also deal with condos, multi-units, apartment buildings, mixed-use or commercial properties?

We can assist with all types of residential properties including condominiums, townhomes and single family, all in any price range. Currently, we do not handle any type of multi-family, mixed-use or commercial properties. The commercial market place is alive and well, rarely are these properties involved in short-sale situations as the financing programs used in these types of properties never really allowed high LTV or CLTV financing (loan-to-value or combined-loan-to-value).

Do some geographic areas have a better chance at a Short-Sale than others?

Yes and No. There is no simple answer to this question, here are some of the reasons why; each bank may or may not be holding a large portfolio of REO (Real Estate Owned) properties in that part of town and could be not very motivated to negotiate a reduction of their loan balance. Each situation and each banking institution has to be treated differently, with available competing home inventories and current market “absorption rates”, all of this plays an important role in the equation. Seeking the assistance of a very experienced Realtor will be of significant help to the property owner in distress.

Without getting into a surgical identification of affected geographical areas, one can say the overall, the hardest areas hit by foreclosures in 2007 is Nevada, Texas, Florida and California with many other states being added to this list.

To view the cities that make the list of the “500 Top Foreclosure Zip Codes” in the country as of June 2007, please go here http://money.cnn.com/2007/06/19/real_estate/500_top_foreclosure_zip_codes/index.htm

Banks have access to this information and calculate their risk based on local market conditions. In Southern California and particularly in areas where they perceive more risk (Sacramento, Los Angeles, Orange County, Riverside and San Bernardino counties) they are more flexible in willing to negotiate with the property owner.

With the potential of a lurking recession and as the housing market worsens, not to mention the recent "melt-down” of the sub-prime industry (triggering very restrictive “lending-guidelines” limiting the extension of available credit to consumers alike), short-sales are now becoming more common in many areas of the U.S. Keep in mind that foreclosure laws could be different for each state so timing and strategy are not always the same for each area.

How can one tell if a home is low-priced or too expensive for a Short-Sale?

Homes at every price point are eligible for a short-sale as long as some of the basic criteria are present and met.

1. The home should be in foreclosure or default.
2. Little or no equity in the home.
3. Homeowner must verify personal financial hardship.
4. Default is approximately 45+ days to an eviction or a foreclosure auction (California).

My home has a lot of deferred maintenance and in need of repair; is Short-Sale still an option?

Yes, but… The inferior the quality and/or condition of the home, the more difficult the approval process will be because the short-sale purchase offer will probably be at a much lower price. The lower the price offered, the more difficult for your bank to accept it. This is a very important element in a short-sale situation and it is always recommended to let the bank's appraiser know about all the work that needs to be done, upfront, so that there are no surprises.

What if our house is already listed with a Realtor and available for sale on the MLS but isn’t selling; can we still do a Short-Sale?

Absolutely! Yes you can and it is now more common in this real estate market. Actually, some banks even require that the home be listed in the MLS before reviewing and approving a short-sale offer. They do this in order to confirm that a loan discount would be necessary.

As described in another question, a classic short-sale situation is one like this:

A homeowner purchases a home for $650,000 in 2003 using 5% of his own money as a down payment.

A year later and sometime in 2004, the value of the home increases by 15% and interest rates move lower. At below 6.75%, our homeowner also decides to refinance and requests some cash-out. The home is appraised and the new value comes in at $747,500, the 2 new combined mortgages now total $710,125. All is well, life is good…

Moving forward to the year 2005, our homeowner loses his job but continues to make the mortgage payments from savings. Luckily, he had cash-reserves.

Another twelve months go by and in 2006 the savings are almost completely gone, still no employment. The homeowner now grows very worried as he begins to realize that shortly he will soon be missing the mortgage payments. In a panic, he decides to sell the home through a Real Estate friend who suggests a listing price of $775,000.

As the months go by and with no offers presented, the home sits unsold and property values are now falling. After two back-to-back price reductions and now at a $700,000 asking price, the homeowner is upside down and has also missed 3 mortgage payments, the foreclosure process has officially begun. The Real Estate Agent presses the homeowner to lower the selling price further, but that now requires his homeowner friend to come up with cash he doesn’t have, dollars required to close the escrow. The homeowner does not want to hear about having to bring money and cover the mortgage “pay-off” shortage due the lender.

At this point, the sad truth is that the homeowner is stuck with the house. He couldn’t sell it and trying to catch up with the back payments is not in the cards. The foreclosure progress-needle is now much closer towards an eviction.

If this situation sounds familiar to you, or if you find yourself in similar circumstances, do yourself a favor and ask your real estate agent about the likelihood of doing a short-sale. You have to explore all options!

If my Real Estate Agent doesn’t have experience with short-sales and they personally don’t recommend it, what should I say or do?

If you believe your agent is not entirely familiar with the short-sale process and how it can certainly help get your house sold, suggest for him to partner with an agent that is. After all, short-selling your house will benefit your agent too.

If by chance the foreclosure process has already begun, please do not allow anyone to stall or delay you from taking action. The principal mistake a homeowner in foreclosure makes is TO DO NOTHING! Before you know it, you’ll be left with no options and could soon be evicted. It is imperative that you deal with the situation immediately. If your agent appears to not want to look into all available options for fear of losing a commission, you should frankly start looking for another agent.

My local real estate agent said I have more than 10% equity in my house; could I still do a Short-Sale?

It depends on several factors. You could very well be better off seeking by first trying a normal open-market sale or refinance. On the other hand, if the current market trends are moving property values down quickly, you could lose that 10% equity in a very short time. Also, your ability to debt service your loans is very important and how much cash reserves you may have (3, 6, 9 months?). There are many other topics of concern and you’re certainly more than welcome to email me at Armando@PrimacyRealEstate.com to discuss your situation further in total confidence.

We’re now behind on our payments and not yet received the foreclosure notice. Can we do a Short-Sale?

Yes and as the real estate market continues to worsen, this will be happening more often than not. Unbeknown to most, this scenario is actually the most favorable for a potential buyer, an investor and the bank simply because a bank will avoid ALL the costs and expenses associated with a foreclosure. By considering and successfully negotiating a short-sale offer before the foreclosure process is initiated, all parties will benefit.

One more very important and relevant comment; In a case such as the one outlined above, it is even more critical for the homeowner to prepared a very compelling "hardship letter” detailing to the lender (the bank) why he, the homeowner is unable to continue to make the monthly mortgage payments on time.

Each week I receive dozens of letters in the mail from individuals offering to help with my foreclosure, are some of these offers legitimate?

Unfortunately, there are too many individuals that are now working the “distressed property” market prying on the uninformed and troubled homeowners with very few proving to be legitimate, and with most that are actually not. Some claim to be able to perform credit repair miracles and/or help you to save your house with the majority either charging upfront fees or realistically not being capable to help you. If you have a lot of equity in your home, they will seek and find you offering ‘creative financing solutions’ and several other dubious ‘sales techniques’. Remember, these people are ALL after your equity! Don’t be a fool and fall for it, avoid them like the plague!

As a Realtor with over 25 years of personal experienced in real estate sales, finance, foreclosures, trustee-sales, short-sales and REO properties, I can reassure you that I can help you whether you have equity or not. If we determine that you have equity, I can also provide you with expert advice, guidance and a legitimate proven marketing plan to try and save it. Conversely, if you don’t have any equity, then we need to talk about and consider a “short-sale” before it’s too late.

To recap, let’s remember that in a short-sale, there is no equity to protect. The only possible way a sales commission is ever paid to a Realtor is what the beneficiary lender approves when reviewing a bone fide short-sale offer. Commissions and all other sales costs will be paid by the bank, from the agreed pay-off amount and not from your home equity or pocket.

What about a Short-Sale offer from an investor, should I accept it?

Clearly this is a decision an individual homeowner needs to make. It is my opinion however, that the principal reason to reject a bona fide offer is because the homeowner has confirmed that at the end, he will realize an income tax consequence. As discussed in another question, most homeowners who are in the middle of a short-sale qualify as insolvent in the eyes of the IRS and can therefore avoid paying additional income taxes stemming from any debt-relief via a short-sale, and assuming the deal was properly negotiated. With that being said, neither the homeowner nor the Realtor should have a concern about the price.

Can you help me do a short-sale on my house?

If you believe that a short-sale solution could be suitable for your situation, the very first step I suggest for you to take is to complete our short questionnaire HERE or e-mail me at Armando@PrimacyRealEstate.com I will personally evaluate your situation and if your property is a short-sale candidate, I will contact you for more information and we can proceed from there. Under no circumstances will you ever be obligated to sell your property by completing and submitting our short-sale assessment form.

What if my bank doesn’t accept the Short-Sale offer?

If the beneficiary, in this case your bank, fails to accept the short-sale offer presented, there is simply no transaction and the home remains the property of the trustor (the homeowner) until it is hopefully sold through a conventional escrow, another short-sale offer or unfortunately, at the trustee sale. The trustee sale is essentially the resulting end of the foreclosure process.

If an investor buys my home, how do they make money from the short-sale of my property?

An investor that successfully buys your home at a discounted price approved by your lender will enable them to probably rent or lease it at a profit, or, after making any needed repairs, it can be sold for a reasonable profit.

Will I be forced to move after the short-sale?

In one word, “Yes”. Once the short-sale transaction is completed, the new owner has ownership rights to the home and the seller must move. The same holds true for any conventional sale.

In isolated cases, the seller might be able to negotiate the rent-back of the property for limited amount of time until they can get suitable housing. These are details that would have to be negotiated on an individual basis.

If you’re expecting to earn a commission from my short sale, could I get some of it?

Regrettably, that is disallowed by all banks. A bank will never tolerate the seller to realize any type of profit or proceeds from the short-sale of his home. If by chance the bank perceives that there will be any amount of “excess” dollars from the transaction, they will want it for themselves to make up for some of their losses.

We have two loans against our home, can we still do a Short-Sale?

Yes, but with each of the lenders, the beneficiaries of the liens now recorded against your property, will have to be individually contacted and the loan balance reductions then negotiated. Some important things to know at this point are not only which lender filed a foreclosure but also if more than one filed and when. In other words, the filing date becomes critically important.

What about if my husband/wife/brother/etc. is also named on the grant-deed along with me but doesn’t want to sell; can a Short-Sale still be possible?

No, as all parties now listed on the grant-deed or mortgage are required to sign the short-sale purchase agreement. Unfortunately, there are no exceptions or loop-holes to get around this.

What if we have other liens (i.e. mechanics, IRS, court judgments) against our home; could we still do a short-sale?

Yes, but once again, it will get much more complex and certainly longer to approve and process. If by chance this is your home scenario, be sure to accurately document all the liens you now have. Each lien holder will have to be negotiated individually. As a rule of thumb, a short-sale in this situation will most definitely take longer than 60 days to complete.

In the case where the home was already auctioned off, is a Short-Sale still possible?

We live in the state of California which is one of the ‘redemption’ states. What this means to the foreclosed homeowner simply is that after the trustee-sale, that previous homeowner has the ‘right of redemption’, the laws in California allows the homeowner, within 12-months after the trustee sale, to ‘reinstate’ (buy back) his property. Because of this redemption period, it is still possible to negotiate a short-sale with the bank even after the trustee-sale.

However, please note that with each passing "milestone" of the foreclosure process as it becomes a REO (lis pendens, foreclosure, trustee sale, REO), the bank's motivation to agree to a short-sale diminishes dramatically. Since the bank is not as willing to negotiate a reduced price, the deal becomes much less attractive to an investor the longer you wait.

If bankruptcy was already filed; do I still have a chance at a Short-Sale?

The answer is “Yes”, but certainly a lot more complicated. When an asset (your property) is included in the bankruptcy filing, unfortunately the bank is no longer the only one with control in the decision making, nor the only entity that can approve your short-sale request. Complicating matters even more, a bankruptcy trustee also involved would have to approve it. Obviously, this situation creates more layers of approvals with potential disagreements by all involved and those whose main objectives are to squeeze all they can that can be had out of the property owner. Don’t get me wrong, it can be done, but again, a whole lot more complicated.

When considering bankruptcy protection as a means to stop a foreclosure, please do yourself a favor and seek competent legal advice. Due to the possibility that a bankruptcy may not completely stop a foreclosure, banks can often get the courts to set-aside the bankruptcy and continue to pursue the foreclosure.

How long does a Short-Sale usually take? I want to get out now!

The short-sale process takes approximately 60-days to complete and sometimes even longer so time is of the essence. It is a complex procedure that takes time so to keep the short-sale option open, you must act swiftly. Should you decide and wait until one week away from an eviction, I can’t think of anyone that would be able to help you complete a short-sale. Simply stated, this is impossible. DO YOURSELF A FAVOR AND DO NOT PROCRASTINATE!