Q: Can the bank come after me for the balance left over after a short sale is completed?
A: If you do a HAFA short sale or have a Fannie Mae and Freddie Mac, FHA/HUD loan then Bank of America has stated they will not pursue a deficiency judgment against a homeowner upon the completion of a successful short sale. This is a really good reason to work with a qualified agent. Worst case scenario Utah recently past SB 42 it states the mortgage company only has 90 days to try and come after a homeowner to collect. I have not heard of a bank doing this in Utah. What typically ends up happening, is the bank issues a 1099C for the deficient balance (which they will write off), again which most homeowners are exempt from due to the Mortgage Forgiveness Debt Relief Act
Q: What is the short sale process?
1. Work with a qualified agent someone who has done at least 30 short sales in the past few years someone who is getting the latest training and knows of any new guidelines and rules that need to be followed. The Banks and Government are always changing little details that affect YOU!
2. Contact your bank and turn in the short sale packet that we fill out to start the short sale process.
3. List the property for sale (no need to put a sign out front if you don’t want one there) on the MLS for advertising.
4. The bank will order an Appraisal or B.P.O. (Brokers Price Opinion) to get the fair market value of the property so they know where they need to be as far as price. That way, when they receive an offer from potential buyers they will have an idea of what the property is worth in today’s market.
5. Receive offers from buyers and then submit the best offer to the bank.
6. Negotiate terms with the bank to release all liens from the property so we can successfully close.
Q: How long before I can try and buy another home again?
A: Almost every lender will tell you there is a two-three year waiting period and some lenders will not allow this program to be used due to credit overlays they have. There are specific guidelines that must be met for borrowers to purchase again without a waiting period. FHA allows borrowers to be eligible for a new FHA loan even if they just recently sold their principal residence with a short sale, these programs are new so call or email for more details.
Q: Why not let the bank just foreclose and take the property back?
A: The banks will look more favorably on a homeowner who worked with their prior mortgage company to sell their property, versus a homeowner who just walks away from the home and left it up to their lender to deal with a vacant home. If you have already walked away the bank may have already secured the property (changed the locks). That is ok! They do that from time to time, we can still get a short sale started and we can have the locks changed back so we can continue to access your property. If you just let the bank foreclose on the house they will then evict you. Eviction is not a good idea you don’t know what day or when they will show up demanding you leave. If you need more time to save up money, to help move some were else, need time to find another job or if you just need some time to get caught up, a short sale is a way to go. With all of the options available today it’s not a good idea to just walking away, it’s harder to buy a home in the future with a foreclosure on your credit. Besides the banks let you stay while you do a short sale a lot of the banks will pay you up to $3,000.00 for relocation assistance for doing a short sale. Most important you don’t have to do any work, the Real Estate agents and banks do all the work, so call me.
Q: Do I need to put a for sale sign up in front of the property?
A: If you would like a sign-up and don’t mind we can put on one up. Otherwise No, it is helpful, but most buyers and real estate agents do over 90% of their work online when looking for a home it saves them time and gas. With great photos, property tours, and Google Maps the buyers narrow down a list of homes they like. Then they go out looking. We don’t need to let all the neighbors know you are doing a short sale or going to be moving soon.
Q: What is a 1099? And will I get one?
A: There are two kinds of 1099’s you can receive, depending on what you do. If you do a short sale you will most likely receive a 1099C the C stands for Cancellation of Debt. If this is what the financial institution issues, then it has forgiven the debt and you must report the amount on the 1099-C as income. Fortunately, the Mortgage Forgiveness Debt Relief Act allows taxpayers to exclude income from the discharge of debt on their principal residence. It includes the cancelation of the complete debt.
Or there is a 1099A Acquisition or Abandonment of Secured Property. When the bank forecloses on the property and takes it back they acquire the property and then they sell it. 1099A’s are usually for a larger amount because when a bank forecloses on a property they usually sell it quickly and for a lot less. With short sales, the bank pushes to get as much money as possible for the property which works out good for everyone and so the 1099C is usually a lot smaller. Again you want to reach out to a CPA/Tax accountant, please make sure they are familiar with this particular tax law. Here is a copy of the tax code you can print to take with you! Tax Code for Debt Cancellation
I have heard some horror stories so if you don’t have or know a good CPA/Tax accountant I do! You can talk to them for free about your personal situation just to make sure you will be ok at the end of a short sale.