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Short Sale Frequently Asked Questions

Do I qualify for a Short Sale?

There are 2 main conditions for a good Short Sale candidate:

1.  They are behind on their mortgage payment and are unable to meet all of their monthly obligations.  Some reasons could include loss of job, divorce, etc...

2.  They have no equity in the home.  They are not able to sell their home and pay off all the outstanding loans that are secured against their property.

How can your team help me with the Short Sale process?

Our experienced team will help you qualify for a Short Sale Transation, aggressively market your home and negotiate with the bank on your behalf.

What are the tax considerations for a Short Sale?

 Whether you do a Short Sale or a Foreclosure you will receive a 1099.  The difference is that in a Short Sale you will receive a 1099-C but for a Foreclosure you will receive a 1099-A. 

So what's the difference between a 1099-C and a 1099-A?  The 'C' stands for "Cancellation of Debt" and the 'A' stands for "Acquisition or Abandonment of Secured Property".  The differences are much more than you get the 'C' with a Short Sale and the 'A' with a Foreclosure. It is important to know that while there are many differences, the tax consequences for the 'C' and the 'A' are the same. You may not even be required to pay taxes on the 'income' as shown on the 1099-C, but don't just assume that you won't have to pay. Before making your final decision, first consult your CPA or Tax Preparer. While we are very good at successfully closing Short Sales, we are not tax experts. Please, consult a professional CPA or Tax Preparer before beginning the Short Sale process.

How will my credit be affected by a Short Sale?

When the actual Short Sale is completed, most banks will report to your credit report that your account was “paid in full for less than the full amount.” Your credit report may also be marked as “settled.” It is important to keep in mind that each lender has a different way of reporting that a Short Sale was done, but this is the most common language that is seen. If your home were to go to Foreclosure you would most often see the bank report “Foreclosure” on your credit report.

It is difficult to guage how much of a credit scoring affect a Short Sale has vs. a Foreclosure. Credit experts will agree that neither a Short Sale nor a Foreclosure is favorable to your credit or credit score, however, the impact of a Foreclosure is much worse. We strongly advise you to work with a Credit and Credit Scoring Expert for more specifics on this topic, and ways in which to improve your credit after the Short Sale is complete.

When should I begin the Short Sale process?   

As soon as you think you might be behind on your mortgage payment give us a call to discuss options.  We are here to help.

Relevant News Articles relating to Short Sales

New Arizona Foreclosure Law Bans Anti-Deficiency Claims for Investors - Arizona is infamous for having the anti deficiency law that made it really easy for homeowners to walk away from their homes with virtually no recourse in the future. Now, it looks like Arizona residents that live in their primary homes for 6 continuous months prior to their home being foreclosed will still be protected, but investors, second homeowners etc will not be able to walk away so easily starting September 30, 2009.

The Fight to Fix Arizona's Broken Anti-Deficiency Law - On July 10, 2009, Arizona Governor Brewer signed into law SB 1271 that is a major change to Arizona Revised Statutes Section 33-814(G) effective September 30, 2009.  The law apparently is intended to protect only borrowers who "utilize" and "use" a home for at least six consecutive months from deficiency judgments, but only if they get a certificate of occupancy for the home.

Arizona's anti-deficiency laws are changing efective September 30, 2009!-  Before agreeing to a foreclosure or short sale it is critical to understand your rights and obligations as a borrower.  In addition to damaging one’s credit, a foreclosure or short sale can result in a deficiency.  The change was intended to limit the type of borrowers that will qualify for anti-deficiency treatment.  Set forth below is a general outline of Arizona law regarding when a borrower may be subject to a deficiency action or sued on its note following a foreclosure or short sale.

Bank Short Sale – a Great Way to Purchase Investment Property  - A bank short sale is a great way for investors to buy property at a fraction of the market price; however there are several steps that should be followed in order to guarantee a successful and profitable transaction. These tips include using a real estate agent experienced in the short sale process, doing research on the short sale specifics, identifying the correct owner of the property, file all associated paperwork in a timely and efficient manner, and completing a thorough inspection of the property before finalizing or signing any papers. [Click the link to view the entire article]

Use a Short Sale to Escape Foreclosure - The beauty of short sales is that they can be a win-win-win situation for seller, buyer and lender. Here's how:  The seller gets out of the mortgage liability without facing bankruptcy.  The buyer gets the home at a reduced price.  The lender agrees to a loss it considers minimal without going through a foreclosure and being saddled with an unsalable property.  [Click the link to view the entire article]