A: Any sale of real estate that generates proceeds that are less than the amount owed on the property. A real estate short sale occurs when the lender and borrower decide that selling the property and absorbing a moderate loss is preferable to having the borrower default on the loan. It is therefore an alternative to foreclosure.

source: Investopedia

A: Requirements will vary between lenders. Typically, the following will need to apply:

1. There are delinquent payments, or payments are about to become delinquent. Many lenders will refuse to work with home owners if payments have been made successfully or are continually made. In some cases, a short sale may be permitted when there is no delinquency.

2. There must also typically be some sort of financial hardship. This could be due to medical conditions, divorce, loss of job, severe injury, and etc.  Lenders are becoming much looser on hardship requirements and in many cases approve short sales where there is no real hardship.

A: Not necessarily. Some lenders may permit a short sale with no delinquency, however, in most cases lenders will be less willing to settle if the loan is current. Lender requirements vary, your attorney will help you determine what they are. Exceptions may be considered if there is a cash contribution or promissory note in the equation.

A: Typically it is much more cost effective for a bank to do a short sale rather than foreclose on a home. Although the bank will still take a loss on a short sale, foreclosing on a home will typically cost them 10%-20% more.

A: As soon as you realize you will have difficulty making the monthly mortgage payments, you should take action immediately and begin consulting with an attorney to help you achieve the best possible outcome. If you can't qualify for a loan modification, a short sale is your next best option to avoid foreclosure.

A: No, this is not recommended. If you are interested in trying to see if you qualify for a loan modification, you should seek that remedy before a short sale - as a loan modification will halt a short sale in progress.

A: The answer is yes, but if you do, you will interrupt the short sale process and potentially negate any chances of closing with a potential buyer. Most attorneys will recommend doing the short sale prior to filing bankruptcy. And even if bankruptcy is chosen first, you are only settling the issue of the debt, not the ownership, and therefore a short sale or foreclosure will still need to occur. If you are currently in bankruptcy, we can still talk to you, however, the bankruptcy would need to conclude before we could begin the short sale process.

A: No. Not every short sale will close, and if a firm or attorney is making those claims or promises, then your are likely being misled. There are many factors that can prevent a short sale from occurring. Because there are multiple parties involved with a short sale - typically 3 at minimum, which include the mortgage servicer, the investor and mortgage insurance company, as well as the buyer and seller - any of them can dictate terms or disagree with a pending sale agreement.

A: Unreasonable cash settlement demands from the banks upon the borrower or disagreements regarding the market value of the property may prevent a short sale from occurring. Some banks refuse to halt pending trustee or foreclosure sales once initiated. This typically occurs when the homeowner fails to act quickly enough.

A: If you're considering a short sale, you should make sure you have obtained an attorney with experience in short sales and foreclosure defense. Your attorney will help determine whether or not you are eligible for a short sale, and if not, they should have options such as loan modifications or other foreclosure defense remedies ready for you to consider.

If you do qualify and choose to go with a short sale, you will need to fill out various paperwork and provide certain financial information and documentation regarding your hardship and etc. Your attorney will handle all of the rest of the negotiations.

First, we start with a Free Consultation. This gives you the opportunity to come in risk free and under no obligation. After you provide us some information about your situation, we then help you determine whether or not you qualify for a short sale.

* If you do not qualify for a short sale, relax - there are other foreclosure defense alternatives or you may qualify for a loan modification - and we will help you determine the best course of action.

Once it is determined that you qualify or are eligible for a short sale, then we will work with a real estate agent to help market and sell your home.

* The majority of short sale transactions with banks require the use of a real estate agent, therefore, putting the home up "for sale by owner" is typically not permitted.

The mortgage company will also be working closely with us along with the real estate agent during the process.

A: The process will vary depending on lender and resources, however, it seems to be improving. Generally, on average a short sale will take around 3-4 months to complete .  In recent years, the process has gotten better and we have seen occasional responses within weeks.

A: A regular sale typically occurs as a contract between a buyer and a seller. However, with a short sale, third party approval is required from the bank, lender or mortgage holder and this can make the process take a little longer. A seller can accept the offer of a buyer, however, closing will not occur unless the deal is accepted by the lender or bank.

A: Short sales often give a homeowner the opportunity to allow the property to be sold for less than the current value with the intent of the loss being less than what they would face with foreclosure. Because the owner is usually behind on their payments, they're also underwater or upside-down on the property. With a short sale, the value of the property is less than what is currently owed. The seller is unable to profit from a short sale, and cannot sell to a family member. And a short sale does not affect your credit rating as long as a foreclosure would.

Foreclosures give the owner an opportunity to bring their payments current. However, if they are unable to meet the requirements, they will lose all legal and equitable interest in the property. When this occurs, the property is then turned over to the bank.

A: In most cases, the answer is yes, a short sale will have less of a negative impact on your credit rating than a foreclosure would. A short sale is would likely reduce a FICO Score 100 to 200 points, whereas a foreclosure or deed-in-lieu of foreclosure will tarnish a seller's credit score from 200 to 300 points.

A: In many cases, the answer is yes, for a number of reasons. With a short sale, you are minimizing or eliminating the potential of a deficiency judgment and also taking less of a hit on your credit score. And recently, Fannie Mae and Freddie Mac announced new guidelines which make it possible to obtain a conventional loan within 2 years of a short sale, or up to 5 years after a foreclosure.

A: The difference between the amount owed to a lender and the fair market value of the property at time of foreclosure sale.

A: Yes! Not only is a short sale less damaging to your credit, you can avoid the potential of receiving a deficiency judgment.

handing cash over

A: Legally, a seller is entitled to sell their personal property left behind to a buyer and will typically receive a separate check outside of closing for things such as boats, lawn equipment, tools, sheds, furnishings, and etc. In some cases, however, a lender may require an affidavit to be signed at closing stating there aren't any other outstanding agreements between the parties. This can be avoided by selling the property to a spouse, son or daughter to the buyer who is not a party to the sales agreement.

A: No. Most lenders will require an affidavit to be signed by all parties stating that the parties cannot be a family member, business associate, or share any business interests together, in order to prevent potential fraud. This is typically called an Affidavit of Arm's Length Transaction.

A: No. With a short sale, you are not responsible for any realtor commissions or closing costs. The bank will take care of both.

A: The bank will cover closing costs, as well as realtor commissions.

A: Although HOA fees are the owner's personal obligation, we strongly recommend you pay them in order to avoid credit damage, debt collection efforts and potential lawsuits. Very few lenders will pay for unpaid HOA fees on a short sale and this can hinder the closing process unless one of the parties has agreed to and has shown they can pay the debt at close.

A: After the completion of a short sale you will receive a 1099-C. This means the debt has been cancelled. Thanks to the Mortgage Debt Relief Act of 2007, taxpayers were allowed to exclude from income the discharge of debt on their principal residence for their original mortgage amount. Debt forgiven through a short sale qualifies for this relief, and applies to debt forgiven from 2007 through 2012 and was extended for debt forgiven through 2013.

More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

A: Yes. However, in order to increase the likelihood that the short sale will be approved, it is recommended that your taxes are filed and up to date. If you are missing this documentation, we do have waivers which can be submitted in place of the required paperwork.