Signs of an Impending Short Sale

Here are 10 signs that you may need to do a short sale:

  • I can't make my house payments. I could pay back some or all of the negative equity. I want to preserve my credit as much as possible.

  • This is a case when the bank would probably not agree to the short sale. However, in this case you should at least consider selling your home for a cheaper home and have the ability to make the house payments.
  • Since I pay mortgage insurance, won't they pay my mortgage if I can't make the payments?

  • NO. This mortgage insurance covers the bank only.  If you do a short sale, the mortgage insurance will at least pay the bank back for some of the short fall in pay off.
  • Does the bank have to approve the short sale before I offer it for sale as a short sale?

  • NO.  For the bank to approve the short sale, usually you must be at least 30 days in arrears and probably more like 60 days late.  However, I have seen cases in which some banks do not even require that you be late on the payments.  The bank will look at an offer you receive, have the house appraised, and then decide whether to take the offer or not.  It is important that you use a realtor who understands the best process to take in order to get an offer on your home that the bank will approve.
  • How long does the foreclosure process take once the bank has filed against me?

  • This depends on the state, and the bank.  Some banks are quicker than others.  Proabably at least 3 months.  However, once you know you can't make the mortgage payments it is best to cut your losses and take action. The longer you are missing payments, the worse your credit will be, and the more time you will spend worrying.  First, try and work the situation out with the bank in case they can offer a solution that can work.  Then get the house sold and move on with a better financial solution.  Either rent or buy a less expensive home.
  • Will I still have to pay real estate taxes if I do a short sale?

  • Property taxes will always have to be paid as part of the short sale. It could be either you or the lender.
  • Is it me or my house that has to qualify for the short sale?

  • The only qualification for a short sale is that you financially cannot make your house payments and do not have enough money to pay off your missed payments. The house's value is only important if the bank thinks that the short sale purchase price is too low to be reasonable.
  • Do I have to pay income taxes on the amount of the loan that the banks forgives?

  • This used to be the case. Now that has been eliminated. However, you should consult your accountant or tax preparer to make sure that you won't have any tax issues that you should know about.
  • How does my Realtor get paid if I can't pay them from the equity?

  • The bank allows for the real estate agents to be paid along with other normal closing costs.
  • If I have a 2nd mortgage or an equity line, can I still do a short sale?

  • It makes it a little more complicated but it is still possible.  It would be better if you have missed payments on both liens though, since the 2nd mortgage holder will probably want the 1st morgage holder to be involved in the loss as well.  There are no hard and fast rules about any of this. As the market changes, the banks are trying to get rid of the administration expenses as well as the bad loans!
  • What is the first thing I should do if I know I am in trouble?

  • Call a realtor, preferably me or someone on my team because we are certified to do short sales and handle foreclosed listings. We are in touch with the banks every day and understand the process to get these homes sold as quickly and efficiently as possible.

If any of these situations describe you, please don't hesitate to call us at 513.766.3888, or you can Email The Meadows Team.