Short Sale Questions and Answers

My dedicated team and I have successfully listed and sold dozens of short sale properties. I hold the Short Sale Foreclosure Resource(SFR®)designation, and if you are underwater on your home and are interested in short selling or learning about your options- please contact me today. If you are still in the consideration phases- below you will find some commonly asked questions about short sales and the short sale process. Please feel free to call me at any time - I am here to help!

• What is a Short Sale? Do you owe more on your home than it is worth? A short sale is when your lender agrees to settle your mortgage for less then what you owe. It is a method that thousands of homeowners and investors have used to sell their homes in recent years. A short sale is a MUCH better option then foreclosure. A short sale can save your credit and costs you absolutely nothing.

• Who Qualifies for a Short Sale? Each mortgage company has different qualifications for short sales. In general, homeowners must prove that they cannot afford to keep their current mortgage, and that the value of their loans is greater than the value of the home.

• How Long Does a Short Sale Take? The time required to sell a home as a short sale varies greatly. In some cases it can be very fast, and sometimes it is very slow. The additional time is required because the seller's mortgage company has to verify more information than in a regular sale.

• When Should I Start the Short Sale Process? In most cases the best time to start is NOW. You want to give yourself as much time as possible. And the faster you can get out from underwater the quicker you can begin a new life! If you have stopped making your mortgage payments the clock is quickly ticking. Your window of opportunity is closing fast. You may already have a set sale (foreclosure) date. We urge you to call or email immeditely to discuss your current situation.

• How much will a short sale cost me? Absolutely Nothing- Our fees are never paid by the homeowner, and we are only compensated if we successfully negotiate a short sale.

What are the Benefits of a Short Sale?

- Preserve Your Credit

- Prevent foreclosure

- No cost to you the homeowner

- Potential to make major purchases including buying another home within 24 months

- Walk away owing your lender nothing

- New legislation protects you and encourages your lender to cooperate with your short sale

Are there tax consequences?

We are not licensed to give out tax advice, but in general, a bank will issue a 1099 form to homeowners who complete a short sale. This 1099 form reports their loss as your income to the IRS, which you may have to pay taxes on. The best way to determine your tax exposure is to speak with a licensed tax advisor. There are several different scenarios with regard to whether or not you will owe federal income taxes on the loss the lender takes in a short sale.

When you do a short sale, your lender is agreeing to settle the debt on the property for less than the amount they are owed. The IRS therefore allows them to write off this loss, which is why your lender will send you a 1099-C after the short sale.

The IRS considers “debt relief” to be income for tax purposes. In other words, if your lender writes off $50,000 on your short sale, they will send you a 1099-C for that amount, and you would include that when you file your income taxes. The “C” stands for “Cancellation of Debt” and the law says cancelled debt is taxable as income.

There are however a few exceptions that most people who do a short sale qualify for that exclude them from having to pay taxes on their short sale.

The Mortgage Tax Debt Relief Act inacted by President George W. Bush in January of 2008, states that homeowners who short sale thier primary residence, and have purchase money loans, pay no taxes on the loss that their lender incurs in a short sale. Purchase money loans are loans used to originally purchase the home.

Homeowners who pulled money out after the purchase of their home will not pay taxes on the loss if the money was used to make significant improvements to the home.

If you pulled out money and did not utilize it to make repairs or improvements to the home you may be responsible to pay taxes on the lender loss. If the property is a second home or investment property you may also be required to pay taxes on the fogiven balance. ***We always recommend that you consult with a CPA or tax professional.

How do I get started?

The first step in completing a short sale is to call me directly, where I can advise you of your options and begin the process with you.

Related Information:

• Short Sale Checklist
• Selling a Home
• Loan Modification FAQ

- Received a foreclosure notice?
- Foreclosure sale date set?
- Last mortgage payment date?
- Tried a loan modification?

Don't Let Time Run Out... Find out now if a short sale is a possibility.