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Short Sale Simplified

Short sale: what it is
A Short Sale is an alternative to foreclosure that lets you sell your home for less than you owe on your mortgage.

How it works
If your mortgage lender agrees, you can “short sale” your home and pay off the entire mortgage balance, including overdue payments, taxes, penalties, condo fees, and legal fees.

You may even be eligible for the federal Home Affordable Foreclosure Alternatives Program (HAFA). If you qualify for HAFA, you could walk away from your debt and receive up to $3000 to cover relocation.
A short sale may be a good option for you if:

  • Your home is worth less than what you owe on it
  • You have overdue mortgage payments
  • You are in a hardship situation, such as unemployment or divorce
  • You do not qualify for loan refinancing or loan modification

In addition, since short sales usually take from 4-6 months to complete, you may be able to stay in your home longer, improving your financial picture as you do so.

Why lenders may agree

It seems illogical that a bank would accept less than the full amount of the mortgage, but consider this: their only other option is foreclosure, which is quite costly for them. 
Banks are not in the real estate business, and the costs associated with foreclosure often approach 40% of the outstanding balance on the mortgage.
In cases like this, the wise move for the lender is to consider a short sale.

About our fee

At Short Sale Liaison, we charge you nothing. Zip. Zero.
 It’s that simple. The lender pays a commission as well as any fees related to negotiating and processing the short sale. There is no downside to working with us – it’s a win/win situation.

What happens to the shortfall

What happens to the difference between the total amount due on the mortgage and the selling price of the home depends on the bank. They can either give you a “waiver of deficiency” or they can try to collect that debt from you. Our firm always negotiates for that waiver.

Tax implications of forgiven debt

In a short sale, where the waiver is granted, the bank will send you a 1099C, which shows your forgiven debt as income.  However, if you qualify under the Mortgage Debt Relief Act of 2007, you can exclude any income from the discharge of debt on your main residence. This includes debt reduced through a short sale, refinancing, loan modification, or any other mortgage debt forgiven. We’ll help you with that, too.

How a short sale affects your credit

Unlike a foreclosure, which can have a very negative impact on your credit score for as much as ten years, a short sale allows you to begin credit repair much sooner and possibly even qualify for a mortgage to buy a new home in as little as two years.

Helping you navigate

While we have intended to simplify the process here, the truth is, negotiating and executing a short sale can take you through treacherous waters. It helps to work with short sale specialists who have seen it all, done it all. Agents who don’t specialize in short sales can be caught by surprise when obstacles arise – and they will.

  • The bottom line is this: the industry average for short sale completion is about one in four – or 25%.  By contrast, since we started doing short sales in 2008, our average has consistently exceeded  95%. (After all, practice makes perfect.)

What gets paid in a short sale
Typically, a short sale will cover the mortgage amount as well as overdue payments, taxes, penalties, liens, and fees, including condo fees and legal fees

In summary
, a short sale, especially if done under the HAFA program, can eliminate your mortgage debt and related expenses, let you avoid foreclosure and its negative credit implications, provide you with cash for relocation, and let you and your family exit the home on your own terms, with grace and dignity.

Find out if you qualify
Check out the short sale process in Short Sale: Five Phases, and learn more about qualifying for HAFA.  You can get a head start by looking at the financial information you’ll need to provide.  After that, it’s up to us, so please contact us with any questions.

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