Chicago Short Sale Top Ten Questions

What is a Short Sale?

A short sale is a sale of real estate in which the sale proceeds are short of the balance owed on the property's loan. It often occurs when a borrower due to hardship cannot pay the mortgage loan on their property, and the lender agrees with selling the property at a loss is better than foreclosing. The borrower and the lender both agree to the short sale process, because it allows them to avoid foreclosure, which involves heavy fees for the bank

What is the benefit in doing a Short Sale?

Most importantly, it relieves the stress of foreclosure and being harassed by the mortgage lender; and it frees you of a big mortgage payment so you can move on. A short sale allows you to stop the foreclosure process and have a new beginning. Also, if you have late payments, and no longer can afford your mortgage, it will stop additional damage to your creidt. During the process, late payments and a foreclosure filings will negatively affect your credit. A foreclosure will be extensively more damaging at lowering your credit score. Since with a short sale, the mortgage is actually settled, it is much more positively reflected when compared to a bank foreclosure. In a distressed situation, you have a possible solution and nothing to lose in attempting to do a short sale.  

Can I get relocation expenses in a Short Sale?

Under the new Home Affordable Foreclosure Alternatives program (HAFA), qualified homeowners will earn a $1500- $3,000 "relocation incentive" to cover moving expenses

How do I qualify for a Short Sale?

You are experiencing financial hardship due to unemployment, divorce, medical conditions, bankruptcy or death.
The home's Market Value has depreciated and the mortgage is in or near default.
It used to be that lenders would not consider a short sale if the payments were current, but that is no longer the case. Realizing that other factors contribute to a potential default, many lenders are eager to take future problems into consideration. 

Can the lender come after me in the future after doing a Short Sale for the deficiency?

Not in most cases. Our attorneys will negotiate your short sale to ensure that your lender does not have go after you to collect the deficiency left on your promissory note after the short sale of your property. If a short sale is not negotiated properly, the lender may retain the right to collect the deficiency in the future. In Illinois, a lender has up to 10 years to collect on a deficiency.



Who will pay the  Realtor's commission and attorneys fees?

In a short sale, since the seller has no funds in escrow, the commissions end up being subtracted from the money going to the lender. So, the lender is the one paying the entire sales commission to the realtor.

What happens to the money that is forgiven from my lender?

The balance left on your mortgage will most likely be written off as a loss by your lender. As a result, some lenders may also send you a "1099" for any amount forgiven you. However, with the Mortgage Debt Relief Act of 2007, you are no longer required to pay taxes on this loss if your short sale was your primary residence prior to 2012.  In any case it is always a good idea to consult with your accountant. 
If I am going through foreclosure, can I do a short sale?

How long can I stay in my home? 

You will not be required to move out until the closing just like a regular sale. In many cases doing a Short Sale will give you more time than a foreclosure since the Short Sale delays the foreclosure process. 

What affect will a Short Sale have on my credit?

 
The most important thing here is to avoid foreclosure since it is the most damaging to your credit. During the short sale process while missing some mortgage payments, your credit will take some hits. 
By avoiding foreclosure, you will most likely be able to resume normal borrowing in a short time, and depending on the time the short sale process takes, some homeowner's credit has been affected between 100-150 points.  Additionally, in 24 months you can qualify for a new FHA loan.


Can any Realtor do a Short Sale ?

Short Sales can be very detailed and complicated. It is not part of basic training for Realtors. It is extremely important to work with a Short Sale Specialist Realtor who is accredited in the Distressed Property Market and posesses the knowledge, patience and experience needed to navigate through the Short Sale Process.