What is a short sale? –Erin B, Las Vegas
In basic terms, a short sale is when a property is sold for less than what is owed on the property. When this occurs, two things can happen:
Why does the short sale process take so long, my friend tried to do one and it took almost a year? –Layke S, Las Vegas
Since the banks are being asked to accept huge losses in a short sale, they have set up a process to make sure each file is reviewed thoroughly. This process takes usually between 90 and 120 days (although they are getting faster). If a short sale takes longer than 120 days, it probably means that your agent isn’t staying on top of the file making the bank stick to their system. Another possibility is that the agent didn’t get everything the bank needed upfront and now has to resubmit new information to the bank which delays the process.
How many mortgage payments do I need to miss before I can begin the short sale process? –Dan M, Newport Beach
NONE!!! You do not need to be late on your mortgage or miss any payments to short sale your home. This is the #1 myth with short sales and has caused a lot of unnecessary damage to people’s credit. If you have a valid hardship, then the bank will approve your short sale whether you have missed payments or not.
What is a hardship? Is negative equity a hardship? –Ryan S, Las Vegas
No, negative equity alone is not a valid hardship in the eyes of the bank. There many different types of hardships, but what it boils down to is any circumstance that will eventually cause you to default on your mortgage. Some common examples are:
How will a short sale affect my credit? –Jay F, Henderson
I’m not a credit counselor and this is beyond my expertise, so you need to speak with credit professional to make sure you get a correct answer. What I have been told is that everyone’s situation is different and the affect a short sale has on your credit varies. The two things hurt your credit the most in a short sale are missed mortgage payments and how the bank forgives you of the debt.
If I short sell my house for $100,000 and I owed $200,000, do I have to pay taxes on the difference? -Jay F, Henderson
Once again, this is beyond my expertise and you should talk to the person that does your taxes. Tax laws seem to change daily. The Mortgage Forgiveness Debt Relief Act and Debt Cancellation from IRS website can give you some insight, but I would still recommend that you speak with a tax professional who understands the complicated tax law.
