 What is a Short Sale?
In the simplest terms, a short sale occurs when a homeowner sells their home for less than the mortgage held by the bank. If a homeowner finds himself in the position of not being able to afford the mortgage payment and pay other living expenses, he may be able to ask the bank to accept a payoff amount less than is owed. Both the homeowner and bank must agree to a Short Sale in order to avoid foreclosure. The Seller should be aware that there may be consequences a result of selling short such as lowering your credit score and being liable for the unpaid balance.
The Short Sale process can be complicated and involves submitting a “short sale package” which in many cases is larger than the original loan documents. A convincing case also needs to be made to the bank for them to believe that they should receive less than was promised on the  mortgage. Also banks have been flooded with requests over the past several months and their resources are strained resulting inlost paperwork and high turnover. Because of these factors and many others a professional to guide you is critical to navigate the process.
We are Coldwell Banker Premier Realty and have listed and sold hundreds of short sale homes in Las Vegas. We can help you determine whether you qualify for a short sale and guide you through the process if you decide to sell short.
Short Sale FAQ's
How will a short sale affect our credit?
What happens to the unpaid loan balance? (the deficiency)
What will it cost us to do a short sale? (How I get paid & closing costs)
Should we keep paying the HOA fees & Master?
Should we stop paying our mortgage? (if they are not already behind)
If we are behind do we have to pay our Insurance & Taxes since we aren’t making the mortgage payments?
Will my neighbors know that I’m selling?
Will I be able to purchase again?
Are there other options besides a short sale?
Who negotiates with the lender?
How will a short sale affect our credit?
Depending on your personal credit profile the effect of a short sale will vary significantly but largely it depends on your course of action. If you stay current, then your credit will not be affected very much and you can actually qualify to buy a home immediately after completing a short sale. However, if you go late on your payments, then your credit will be affected significantly as it will show you were delinquent on your credit report. Typically a person with an average credit profile will see their credit scores rebound within 8-18 months. (Credit Profile is the number of trade lines you have on your credit report).
What happens to the unpaid loan balance? (the deficiency)
The deficiency balance is forgiven when the short sale is negotiated. Depending on the terms of your transaction you may be able to obtain a deficiency waiver which means the bank is waiving their legal right to pursue you for the outstanding debt. If you do not have the deficiency waiver as terms of your transaction then the bank is withholding their right to potentially pursue you personally for the remaining balance of the debt. This is the main purpose of using a professional short sale negotiator, such as an attorney or consultant, is to protect the homeowner from future ramifications.
What will it cost us to do a short sale? (How I get paid & closing costs)
Every transaction is different and depending on your situation it may cost you $0 or it may cost you thousands of dollars depending on whether the bank wants a capital contribution from the seller or not. It is advisable to save money while going through a short sale so if the bank requires a capital contribution. (All real estate commissions and transaction costs are paid by the selling bank). However, a retainer fee for professional services is typical. The closing costs may also be paid by the lender, but again that will vary depending on your lender and what kind of loan you have.
Should we keep paying the HOA fees & Master?
In the state of NV if is advisable to stay current on HOAs due to the fact it is a state that allows HOAs to actually foreclose. It may actually cost the seller more to get the accounts to current that it would have been to just make the payments. HOA companies are getting very aggressive collecting past due fees and will actually lien the property making it very difficult and expensive to close escrow.
Should we stop paying our mortgage? (if they are not already behind)
Determining whether you should stop making your mortgage payment is a decision you must make as it is unethical for anyone to recommend you cease making payments. However, the reality is that most banks will not move forward with a short sale when the mortgage payments are being made. It does happen when in a serious hardship and the homeowner is seen as a risk of imminent default but that is up to the investor who owns the mortgage. However, the lender will usually require a larger contribution at the closing of escrow and the only benefit of staying current is protecting your credit rating.
If we’re behind, do we have to pay our Insurance & Taxes since we aren’t making the mortgage payments?
Most mortgages have an escrow account set up and that account typically has a surplus of 4-8 months worth of both taxes and insurance. The lender will usually pay your taxes and will obtain “forced placed insurance,” which is normally a subsidiary company of the lender. The insurance provided by the lender is not as inclusive, so if you are worried about your personal property, then it is recommended that you contact your insurance company and make arrangements to pay this separately. Always check your mortgage statements to see an escrow summary which will tell you the next time those payments are due.
Will my neighbors know that I’m selling?
Only if you want them to; it is not necessary to have yard sign.
Will I be able to purchase again?
Yes. Current lender guidelines are 3-years which is subject to change. Contact a Coldwell Banker Premier Realty agent to review regulations that apply at that time.
Are there other options besides a short sale?
Yes. There are others -- Loan Modification and Deed-in-Lieu, for example. Your Coldwell Banker Premier Realty agent can provide you details about both.
Who negotiates with the lender?
Coldwell Banker Premier Realty is proud to recommend any one of the following Short Sale professionals who are equipped to negotiate with the lender on your behalf depending on client situation.
Millennium Consultant Group
Cogburn Law Offices
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