WHAT IS A SHORT SALE?

 

A short pay is a negotiated settlement that the lender or lenders may accept in lieu of the total amount owed to pay off a loan as an alternative to foreclosure.  Many times a bank/lender can be convinced that they will be “better off” if they take a “short sale” now rather than getting the property back by foreclosure and try to sell it later with extra additional costs and expenses.

 

 

HOW MUCH TIME DOES IT TAKE?

 

The “Short Pay” discount negotiation process can be a lengthy one.  Historically, it has taken between two and six months to get an approval.  But GOOD NEWS!  New programs are speeding up the process. We may get you a verbal approval in several DAYS and close the transaction in 4 to 8 WEEKS! 

 

 

HELP!  MY HOUSE IS GOING TO FORECLOSURE!, IS THERE ENOUGH TIME?

 

Sometimes yes and sometimes no.  Just starting negotiations will not automatically put a stop on foreclosure. However, many times we can convince a lender to pause foreclosure to let us attempt to negotiate the “short pay”. Therefore, while there are no guarantees, it does not hurt to give it a try.  

 

 

WHEN DO I NEED TO MOVE?

 

The purpose of a “Short Sale” is to get the needed discounts from the lender(s) so that the property can be sold before the foreclosure auction.  One way or the other, you will be moving.  Recent programs are offering sellers a CASH INCENTIVE up to thousands of dollars to move!

ARE THERE ANY PROMISES OR GUARANTEES THAT THIS WILL WORK?

 

NO!  There can be no promise or guarantee to save your home from foreclosure.  When mortgage payments are missed, the lender/bank is in prime position and can proceed directly to foreclosure.  However, most of the time, they do not want this and we are excellent at presenting alternatives to the lender/bank so they will accept rather than foreclose.  We are excellent at what we do, but NO PROMISES are made from us to you as to whether or not the lender will accept a “short pay discount” – they may or may not.

 

 

CAN I GET ANY MONEY FROM THE SALE?

 

NO.  In granting a “short pay discount”, you, the borrower will get no proceeds from the sale of the property.  If the lender is going to take a loss, they will not allow you, the borrower to receive any proceeds.  It would be illegal for us to pay you anything from the sale as it would be considered "loan fraud".

 

 

IF THIS DOESN’T WORK, THEN WHAT?

 

You will likely lose your house to the foreclosure auction.  A “short sale/short pay discount” is an alternative to foreclosure.

WILL A SHORT SALE RESULT IN YOUR LOAN BEING "SATISFIED" OR "RELEASED"?


THE TERM “RELEASE”

 

A lender may offer to “release” its lien or interest against the property in exchange for less than the total amount of the loan.  A release will allow the property to be sold without paying off the total amount of the note.  However, the note is not termed “satisfied”.  Advantages: This successful “short pay” will allow the property to be sold and therefore avoid foreclosure.  Disadvantages: The remaining debt on the property (sometimes called a “short fall deficiency”) still remains.  You may still be liable for the note – in other words – you may still be responsible for the money. The reality: It is not likely the lender will pursue the short fall balance unless you are solvent with significant assets.  If you don’t try a “short sale,” the property goes to foreclosure and is sold for less than what you owe you may have a “short fall” balance anyway.  So what does it hurt to try?

 

Good news:  In California, the Lender cannot pursue a deficiency judgment if the property is a primary residence, has not been refinanced and if it is a “Purchase Money Loan.”

 

THE TERM “SATISFACTION”

 

This is when a lender accepts a “short pay” discount from what is owed as a complete and total satisfaction of what was owed on your property and releases its lien against the property when it is sold.  Advantages: Your mortgage and note, the total amount of your agreed obligation to the lender is termed “Satisfied” at a discount from what is owed.  When the property is sold, the debt is entirely paid off.  Disadvantages: You will get a 1099 IRS form showing the difference between what you owed and what was accepted as a discount.  These same tax consequences exist whether you obtain a short sale or if the property goes to foreclosure auction and sold at a discount there or sold later at a discount as an REO property.  We advise that you discuss this with your tax advisor because the lender is making your owed money disappear. New IRS rules may mean that you will owe no taxes on this "forgiveness of debt income". Similar rules have been adopted by the California Franchise Tax Board.  Check with your tax advisor. 


Sometimes our negotiations are successful in obtaining a satisfaction.  Sometimes all we can get is a release.