Now that the dust has settled on the fiscal cliff vote, most short sale sellers, prospective short sale sellers and agents have heard that the Mortgage Debt Relief Act of 2007 has been extended another year. Savvy short sale sellers previously “on the fence” about listing their property due to the tax consequences are picking up the phones and calling their agents. Now, they are ready to list.
Five Questions from Prospective Short Sale Sellers
In addition to questions about the tax consequences of a short sale (which should only be answered by a qualified tax professional), here are five additional topics that will likely arise in your short sale listing appointment, so be prepared!
1. How long will the short sale take?
There are so many factors that impact the speed with which a short sale is approved that it is hard to say. If there are multiple liens at different lending institutions, the short sale usually takes a little bit longer to process. Depending upon the skill set and cooperation of all of the parties involved (including the bank employees) and provided the buyer sticks around during the process, the short sale could take anywhere from six weeks to five months.
2. Will the bank come after me at closing?
Certain states have deficiency statutes that protect short sale sellers from any legal ramifications after closing. Otherwise, it’s a good idea to negotiate with the lender and assure that the short sale approval letter clearly states that the lender waives the right to pursue the deficiency balance after closing.
3. Will I get any relocation assistance money?
The Treasury Program, entitled Home Affordable Foreclosure Alternatives (HAFA), Fannie Mae, Freddie Mac and many of the major lenders can offer relocation assistance money to short sale sellers at closing. There are certain guidelines whereby the money is paid, and it is always paid on the closing day, not before.
4. How will the short sale impact my credit?
Each person’s situation is so unique that it is really hard to say. Your client’s credit score is based on a number of factors, including the number of late or missed mortgage payments, as well as the short sale itself, which is often reported as “paid settlement” or “paid for less than full amount.”
5. Can I sell my home in a short sale if I am current on my mortgage?
There are all sorts of reasons that a person would need to sell his or her home in a short sale. Loss of income is just one reason. Others may include divorce, death, decrease in income, adjustment in mortgage rate, incarceration and excessive credit. The investor on each loan has guidelines for approving the short sale, and some can approve a short sale if the seller has no late payments.
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