Homeowners FAQ


What is a short sale?
A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan. It often occurs when a borrower cannot pay the mortgage loan on their property due to some sort of hardship, but the lender determines that allowing a short sale will result in a smaller loss than what they would incur as a result of foreclosing on the property.
Top

Is a short sale right for me?
Only you can determine if a short sale is your best option. You should evaluate all of your options including requesting a loan modification from your lender, renting out your home, getting a roommate to help with mortgage payments, or letting it go to foreclosure. You should consult your CPA and/or attorney when making your decision in order to fully understand the tax and legal consequences of each of your options.
Top

How do I get started?
First of all, it is very important to work with a qualified Realtor® when pursuing a short sale. Some companies may offer to give you assistance without hiring a Realtor® but it is very important that you work with a Realtor® who understands how to sell your home in today’s market. If you do not have a Realtor®, contact us and we can assist you in finding one. From there, you will complete the RealtyTMS® Short Sale Package which is submitted to your lender(s) and includes the items necessary to begin a short sale request. We will assist in the assembly of your package and submit the complete package the lender(s) on your behalf.
Top

What is considered a legitimate hardship?
This may depend on the lender(s) or investors that hold your loan. The key to writing your hardship letter is to be truthful, explain clearly the specific hardship which is preventing you; or will prevent you in the near future, from staying current on your mortgage payments. Include dates where appropriate. Keep your hardship letter to one page, specifically request a short sale in the letter, and make sure you physically sign/ date the letter. Below are some common hardships:

  • Family or personal illness or injury
  • Illness or injury in your extended family that results in relocation
  • Job relocation when your home has negative equity
  • Loss of employment or a significant reduction in your income.
  • Divorce
  • Military deployment resulting in the necessity to relocate
  • Bankruptcy

Top

Do I have to be behind on payments in order to pursue a short sale?
Again, this can be lender/investor or loan specific but typically you do not need to be behind on payments in order to pursue a short sale. Usually, you will need to show in your hardship letter why you will inevitably reach a point in time where you will no longer be able to stay current on your payments and therefore are requesting a short sale. The exception to this is an FHA loan which does require that you are at least 31 days late in your mortgage payment before a short sale approval will be issued.
Top

Why would my lender agree to accept a short sale?
Your lender(s) would agree to accept a short sale because often times a short sale will result in a smaller loss to the investor versus a foreclosure. In a foreclosure, the lender will have additional costs in carrying and maintaining the property until it is resold as an REO (bank owned property).
Top

Do lenders approve all short sales?
No, lenders do not approve all short sales. Each lender is different in their approval criteria and each case is unique. Short sales are like fingerprints, no situation is exactly the same. The lenders evaluate each case and make their decision based on the information specific to that particular loan, borrower’s hardship, and borrower’s financial status. The approval often depends on the investor that actually owns the loan. This investor is behind the scenes but is often an integral part in whether or not your lender can approve the short sale.
Top

I have more than one loan; can I still do a short sale?
Yes, you can do a short sale with more than one loan on the property. We work simultaneously with both of your lender(s). It is important to also realize that even if both of your mortgages are through the same servicer, they are separate entities and therefore we will be communicating with both departments as they do not communicate with each other in most cases.
Top

I have filed for bankruptcy; can I still do a short sale?
Yes, you can still do a short sale before, during, or after you have filed for bankruptcy. It is important to understand that the bankruptcy does freeze all of your assets and until the home is released from the bankruptcy, the short sale will be put on a stay or what is considered an “on-hold” status. This can extend the timeline and cause the short sale process to take longer. Additional orders must me requested by your bankruptcy attorney to allow a short sale to take place. We strongly recommend you speak with your bankruptcy attorney for advice in regards to how this will affect your short sale situation.
Top

I have several judgments and liens on my home; can I still do a short sale?
Yes, you can still do a short sale but you will have to get those liens and/or judgments released from the home. Typically it is better for you to pursue those on your own or with the help of an attorney. We can work on those liens and judgments for you for an additional fee but we will need your cooperation in assisting us in getting those released.
Top

What is HAMP? Do I qualify?
HAMP is the Home Affordable Modification Program. This program was put in place to provide eligible homeowners the opportunity to modify their mortgages in order to make them more affordable. For further details and to see if you qualify please visit https://www.hmpadmin.com/portal/programs/hamp.jsp
Top

What is HAFA? Do I qualify?
HAFA is the Home Affordable Foreclosure Alternatives Program. It was introduced in 2009 by the U.S. Treasury Department to provide a viable option to homeowners who are unable to keep their homes through the existing HAMP Program. HAFA took effect on April 5th, 2010 and sunsets on December 31st, 2012. For details, guidelines and qualifications of the program please visit https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.jsp
Top

If I have assets, can I still do a short sale?
Yes, you may be able to do a short sale even when you have assets but depending on what these assets are and how much they are, the lender may request that you bring a monetary contribution to the sale and/or sign a promissory note. Some short sales are denied because a homeowner has too many liquid assets. Again, these are reviewed on a case-by-case basis.
Top

How long does a short sale take?
The average short sale takes anywhere between 3 and 6 months to complete. Keep in mind there are many variables in each short sale review and each lender has their own process and timeline. Some short sales can take less or more time depending on the lender, the number of liens and/or judgments on the property, the financial situation of the borrower, what and how many investors own the mortgage, and the number of short sale requests that particular lender is currently reviewing. Also, if a buyer terminates their offer during the review process, this can cause further delays while a new buyer is found and a new contract is submitted. The key is to make sure you are quick to supply all requested paperwork right away to keep the process moving forward as quickly as possible.
Top

What happens after the short sale?
After the short sale, the difference in what you owed and what the lender received at closing is considered a deficiency. In some cases, the lender will forgive the deficiency and the borrower is free from making any further payments to the lender. In this case, that deficiency amount may be considered income to the borrower and may need to be declared on the borrower’s taxes. If the lender does not forgive the debt in full, they may require the borrower to sign a promissory note and/or may retain the right to pursue the borrower for the deficiency at a later date. Keep in mind that letting the home go to foreclosure can result in a deficiency as well and that often times in a foreclosure the home is sold for less than what it is in a short sale and therefore the deficiency would be greater. Letting the home go to foreclosure is not a solution to the deficiency issue in most cases. Again, we strongly recommend you speak with a qualified CPA and/or an attorney to discuss your specific case.
Top

How will a short sale affect my credit?
Evidence shows that a short sale can be less harmful to your credit than a foreclosure but we strongly suggest you speak with a CPA and/or a mortgage expert to discuss the specific ramifications of a short sale on your credit. Each case is different and there is not one answer that fits all situations.
Top