More about Short Sales
The Good, The Bad and the Ugly of “Short Sales”
Losing a home can be a very painful experience. If you are facing foreclosure or think you might in the future all hope is not lost!
If you would rather explore other options besides bankruptcy or foreclosure to avoid lawyer bills, embarrassment, severe damage to your credit report and a blow to your self esteem you, keep reading for more information, then call us for assistance at (847) 550-5500.
You Can Move On!
You may not be able to keep your home, but you can keep your dignity and move on with your life. If you own a house and can’t keep up with your payments you still have options. One real estate solution is known as a “short sale”. This is where your lender agrees to let you sell your house less than what you owe because they believe that you will eventually let the house go all the way to foreclosure and they will own it. In certain situations this can also be known as “debt forgiveness.”
Banks and other lenders prefer to NOT own houses, in the vast majority of cases, if you can’t pay your mortgage. There are some disadvantages to a short-sale, but if done properly, you have a chance to avoid long legal problems with some forethought and planning.
Things to do to protect yourself:
- Get a competent real estate broker dealing with short sales [our phone number is (847) 550-5500.]
- Get a competent real estate attorney / lawyer (we can give you a list of good attorneys who deal with short sales.)
- Talk with your CPA / tax advisor about tax implications. When lenders allow “debt forgiveness,” the IRS does recognize this as income. The law changed in 2007, but is only good till 2010 then reverts back to taxable income. BE PREPARED.
- In Illinois, in some circumstances, the lender can try to recover from the borrower the amount forgiven in an action known as a “deficiency judgment” for UP TO 10 YEARS AFTER the property sells. Do NOT play games with this process. You could pay for it 10 years after the sale. THIS IS NOT A SCARE TACTIC, BUT IS A FACT. Licensed attorneys should be consulted if your lender initiates legal action.
- Lenders are different and some will require more documentation and be more difficult to work with than others. Persistence is the key ingredients in a successful short-sale.
- If you have a primary mortgage from one company and a second mortgage from a different company, then both lenders will need to be contacted and both will need to be satisfied. Same holds true for mechanics liens, tax liens, etc.
- Before submitting a short sale package, the house MUST be sold to a buyer through a real estate agent who specializes in handling short sales (that´s us.)
- PLEASE UNDERSTAND that this guide is not legal advice and is NOT a substitute for working with an attorney / lawyer in your area.
Steps to Short Sale Success
1. Call Us and Be Honest With Us
We can only help if you tell us the truth. Not telling us you´re in a short sale situation will only delay the process and may result in you losing your home and being foreclosed on. We´ll help you, as long as you´re willing to help yourself by being honest with us.
2. We´ll Need a Signed Listing Agreement
The process is not quick not easy. Market time right now in the greater Chicago area exceeds six months. Don´t expect a quick process, nor an easy one.
3. Provide your Lender the Letter(s) of Authorization
Your lender cannot legally share your private information with anyone without your written consent. You´ll need to write your lender giving us permission to talk to them and to have them release information to us and to the attorney / lawyer, the escrow officer and the closing agent at the title company. (We have form letters that can help this process.)
4. Only Now, Can We Take Over and Start the Process
The lender may be willing to help, but it will take several calls to find the right person. From here, we will compile the Preliminary Net Sheet, the Hardship Letters, the Validation of Income and Assets, the Bank Statements, the Comparable Market Analysis, the Purchase Agreements, the Validation of Funds and all the other paperwork necessary for your lender, and then start the negotiation process. The process is lengthy and tedious. It CANNOT be accomplished in weeks, but will take MONTHS. This is entirely different from a “normal” listing, if there is such a thing.
5. Final Tip to Protect Your Credit Rating: Once the lender has agreed to accept less from a new buyer for your home than what you owed; politely ask them if they will not report this to the credit bureaus. They don’t have to help you, but it has been known to happen in the past for people who have developed a good relationship with the lender´s loss mitigation specialist. It cannot hurt and can only help you.
*Disclaimer: This document in no way attempts to give legal or tax advice. You should consult a licensed attorney / lawyer, tax advisor, or other advisor if you have questions about your specific situation.
We hope this information has helped you. If you have more questions that need answers, please call us at (847) 550-5500.
We’re here to help.