10 . I can’t make my house payments, but I could pay back all or part of the negative equity. And I want to preserve my credit score, is a short sale right for me? Probably not. In cases where the seller can pay back all or part of the negative equity (usually to the 2nd lien holder), it makes sense for them to work out a repayment plan. The lender will then release the lien & allow the home to close.
9. If I pay mortgage insurance & default on my loan, why wouldn’t that cover the deficiency amount? Mortgage insurance is there only to protect the mortgage lender.
8. Do I have to have my home “approved” by the lender prior to offering it for sale as a short sale? No. Technically speaking there is no such thing as being “short sale approved”. The actual approval only happens with an accepted offer.
7. I just missed a payment & know I will miss more, how long does the foreclosure process take & is there time to do a short sale? It’s different in different states. In the Midwest a foreclosure can take over 1 year. In California it’s taking 6+ months. Generally speaking a well priced short sale being processed by an educated short sale listing agent will sell & close in less than 120 days.
6. Will I still have to pay property taxes if I do a short sale? Yes, taxes always have to be paid as part of any accepted short sale. Whether it’s you or the lender, it depends on their policies & the specific agreement you reach while negotiating the short sale.
5. I owe more than my house is worth & I can’t make the payment. Do I have to somehow qualify for a short sale? No. If someone can’t make their payment & they are otherwise insolvent, they qualify for a short sale. Note: insolvent means their total debts are greater than their assets.
4. Do I have to pay income taxes…I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me, the seller…is it true? It WAS true, now it’s not. Consult your tax attorney or qualified CPA. Very recently the tax law was modified & now most people who do a short sale will have no taxes due.
3. How does, my listing agent get paid…who pays the commission? The bank will pay the commission along with all the other usual closing costs.
2. Do I have to miss a payment to do a short sale? No. MOST lenders have started accepting short sale offers from sellers who have never missed a payment.
1. The Number 1 question: I want to do a short sale & have a 2nd mortgage; does this make me ineligible? No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your 1st lender will be paid off by the sort sale, then you just negotiate the terms with the 2nd lender. Most short sales do involve 1st & 2nd lien holders.