Below are some basis questions all homeowners ask to determine if a short sale is the best route to take when they are facing losing their home.

Do I have to be behind on my mortgage payments to qualify for a short sale?

Not necessarily. A financial hardship must exist to qualify for a short sale such as:

  • Loss of job or reduced income
  • Health or medical issues
  • Relocation
  • Loss in home value which may result in losing the home

Do short sales take months to close?

Depending on the negotiator, it is possible to close a short sale within 30 days from time of an offer. Every short sale is different and if there is more than one lien holder, it can take longer to get agreement between all parties.

Do banks prefer a short sale or foreclose on  a property?

Banks would prefer not to foreclose on a property due as it is a more costlier process and generally end up losing more money with a foreclosure. Some lenders are reaching out to homeowners and offering monetary incentives to do a short sale rather than let the home go into foreclosure.

Do the lenders sue homeowners for shortfall where the property sells for less than the loan amount?

California has certain anti-deficiency protections in place for short sales and foreclosures, depending on the circumstances. It is always best to consult with your accountant and/or attorney if you have questions concerning this.

With regard to my credit, do short sales and foreclosures have the same impact?

A foreclosure will be more damaging to one’s credit than a short sale. With a short sale what appears on credit reports are the missed mortgage payments.

How long after a short sale can I qualify to purchase a home?

With conventional loans, it is possible to obtain a mortgage within two years. A foreclosure can take 3 to 7 years depending on the type of loan to buy another home.

Will I have to pay taxes on the difference between the amount I owned the bank and the actual sales price?

You may receive a 1099 from your lender, but due to the 2007 Mortgage Forgiveness Debt Relief Act, among other considerations, the homeowner may not owe any taxes on their transaction. This Act is due to expire at the end of 2012.

How Do I Get Start With the Short Sale Process?

If you believe a short sale is your best option, contact a real estate agent who will help you get your home on the market.  The sooner the better so there is enough time to get an offer and prevent the foreclosure. Once an offer is received and accepted by you the Seller the negotiation process with the bank begins. The agent you hire will guide you through the whole process from getting the required paperwork to the lender to negotiating the sale.

**Again for any tax related issues be sure to consult with a CPA or Attorney.

About Linda Urbick Linda

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