Short Sale Frequently Asked Questions

What is a Short Sale?
     A short sale occurs when you owe more than the fair market value of the home, face a demonstrable financial hardship, and need your lender鈥檚 approval to close escrow. If you have more than one loan on the property, such as a first mortgage and a home equity loan, each lender will have to approve the transaction.

Why must lender(s) approve the transaction?
     A mortgage loan, home equity loan, and other secured loans are all liens against the property to pass to the buyer, those liens must be satisfied. Therefore, getting our lender (s) to accept less than it is owed is a critical step in a short sale. For your lender (s) to accept a short sale--and therefore less than what鈥檚 owed on the loan( s)--you must demonstrate a financial hardship and inability to pay back the full amount of loan (s). In a sense, this is like 鈥渞everse qualifying鈥?for your loan(s).

What will I have to do to get short sale approval?
     Depending on the Lender (s) requirements, you will need to provide a hardship letter detailing why you are unable to pay the difference between the fair market value of the home and the loan amount (s). You might have to provide bank statements, tax returns, financial statements and other documents to prove that you do not have the ability to pay off the loan. You will have to sign an authorization letter, allowing the lender (s) to speak directly with your real estate agent to facilitate the approval process.

What happens after my agent receives an offer?
     The offer will be presented to you, and if you want to accept the offer, your agent may draft a counteroffer of addendum containing 鈥渃ontingency鈥?language. That is, you are willing to accept the offer, but the deal will not be final until the lender (s) approves the transaction. Then, your agent will submit the signed contract, including any counteroffers and addenda, to the lender (s) along with other documents that the lender (s) may require.

How long will the offer take?
     It depends on the lender鈥檚 workload and requirements. Sellers and buyers must be prepared to wait at least two to three months for the seller's lender (s) to approve the transaction. Remember that after the lender (s) approves the transaction, other contingencies may have to be met (home inspections, buyer鈥檚 loan qualifications) before the transaction actually closes. Your lender (s) approval is only one piece of the puzzle.

Will the house stay on the market?
     If the property is listed in the Multiple Listing Service (MLS), it will be placed in 鈥渃ontingent鈥?status, meaning that a purchase agreement has been executed, but the deal is awaiting short sale approval. As a practical matter, listings that are in contingent status come up in property searches, and it is possible that an other buyer will see the house and make an offer. Your agent will be required by Nevada law to present other offers to you.

If my lender (s) agrees to the short sale, do I still owe the difference?
    It depends on the lender. You may receive a deficiency judgment for the difference between the amount of the sale and the amount of your loan (s), which you will still owe. The lender may forgive the debt, and the IRS may treat that as income. There may be consequences on your credit report and credit score. You should seek professional advice from an attorney, certified public accountant or other professional as to the credit, legal and tax consequences of a short sale.

How does a foreclosure versus a short sale show up on the homeowner鈥檚 credit?
    It depends on how the creditor reports it to the credit bureaus. Generally, a foreclosure will show up as FORECLOSURE, and can stay on the homeowner鈥檚 record for up to seven years. Anytime the homeowner applies for a new loan or has their credit run, the foreclosure will likely show up. More and more employers are running credit for job applicants. A short sale is listed as SETTLED DEBT, and is much less harmful to homeowner鈥檚 credit than a foreclosure. It is not paid in full as it would be if the full balance was paid off on the mortgage, but a short sale is much better credit wise than a foreclosure. Please have your homeowners consult a credit company for more information.

What liability does the homeowner have when doing a short sale?
    In a short sale, it is possible the bank could issue a 1099-C to the homeowner for the deficiency in what the lenders are forced to cancel. This means the homeowner could face a taxable income of that difference on their taxes. If the homeowner has a negative net worth (including the house), this can often be canceled out so there are no tax consequences that occur from the 1099-C. The lender will sometimes ask the homeowner for an unsecured note for that cancelled debt or a portion of it. This is similar to an I.O.U. We have been very successful at negotiating to have NO unsecured note and that homeowner鈥檚 cancelled debt considered settled at closing. This is critical. However, when it must be done to make the short sale go through, often a partial amount of the cancelled debt is required in the form of an unsecured note often at great terms, such as 0% interest. In those situations, the other potion of the cancelled debt is considered settled and forgiven.

Short Sale Package Checklist

Foreclosure Help

Contact us if you are concerned about your property

What is foreclosure?
     Foreclosure is the legal process lenders use to try to recover the loan amounts they are due on past due home loans. Most lenders do not want to own real estate and would rather have the loan paid off, or the loan payments current.

Nevada Foreclosure Law Summary
     In Nevada, lenders may foreclose on deeds of trusts or mortgages in default using either a judicial or non-judicial foreclosure process.

Judicial Foreclosure
     The judicial process of foreclosure, which involves filing a lawsuit to obtain a court order to foreclose, is used when no power of sale is present in the mortgage or deed of trust. Generally, after the court declares a foreclosure, your home will be auctioned off to the highest bidder.
     The borrower has one year (12 months) after the foreclosure sale to redeem the property if the judicial foreclosure process is used.

Non-Judicial Foreclosure
     The non-judicial process of foreclosure is used when a power of sale clause exists in a mortgage or deed of trust. A "power of sale" clause is the clause in a deed of trust or mortgage, in which the borrower pre-authorizes the sale of property to pay off the balance on a loan in the event of the their default. In deeds of trust or mortgages where a power of sale exists, the power given to the lender to sell the property may be executed by the lender or their representative, typically referred to as the trustee. Regulations for this type of foreclosure process are outlined below in the "Power of Sale Foreclosure Guidelines".

Power of Sale Foreclosure Guidelines
     If the deed of trust or mortgage contains a power of sale clause and specifies the time, place and terms of sale, then the specified procedure must be followed. Otherwise, the non-judicial power of sale foreclosure is carried out as follows:

1. A copy of the notice of default and election to sell must be mailed certified, return receipt requested, to the borrower, at their last known address, on the date the notice is recorded in the county where the property is located. Any additional postings and advertisements must be done in the same manner as for an execution sale in Nevada.
   Beginning on the day after the notice of default and election was recorded with the county and mailed to the borrower, the borrower has anywhere from fifteen (15) to thirty five (35) days to cure the default by paying the delinquent amount on the loan. The actual amount of time given is dependent on the date of the original deed of trust.
    

2. The owner of the property may stop the foreclosure proceedings by filing an "Intent to Cure" with the Public Trustee's office at least fifteen (15) days prior to the foreclosure sale and then paying the necessary amount to bring the loan current by noon the day before the foreclosure sale is scheduled.
    

3. The foreclosure sale itself will be held at the place, the time and on the date stated in the notice of default and election and must be conducted in the same manner as for an execution sale of real property.

Lenders have three (3) months after the sale to try and obtain a deficiency judgment. Borrowers have no rights of redemption.

Stop Foreclosure (Government Guide)

	Keeping the property vs. selling the property
	Workout with your lender
	Refinancing and new junior loans
	Loans to get your current
	Bankruptcy

Foreclosure Investing

contact us if you are interested in investing in foreclosure properties

    Foreclosure investing represents an amazing opportunity to build personal wealth in the flourishing real estate market. Some of the greatest family fortunes in the history of our nation, in fact, were created through real estate ownership and smart investments.
    Investing in discounted real estate such as foreclosures is one of the surest and quickest ways to make money in the industry.
    When a homeowner defaults on his or her mortgage, the lender will foreclose on that property and sell it to the highest bidder at a public foreclosure auction. Every day people, not just investors, are attracted to foreclosure investing opportunities because frequently they can buy these properties at prices well below market value.
    Potential homebuyers can also get a significant amount of instant equity up front investing in foreclosures.
    Of course, there are no guarantees with any investment. But, all across the United States, people just like you earn almost immediate income by "flipping" foreclosure properties for big profits. So, how do you get started with foreclosure investing? Already, you've taken an important step 鈥? reading to learn more about the process.

Things you should know before investing in foreclosure properties
     The reality of foreclosure investing is far different than what many people have seen either through infomercials or books that have been written. It is possible to buy foreclosure properties, but the key is to know your strengths and weaknesses.
     The first example is the major problem most beginning investors will have. What is the Market Value of a property you are interested in? Experienced investors will usually all have a property valued close to the same amount (3% variance). They will use local Multiple Listing Service comparable sales, Title Company comps and experience to come to that value. If you are not fully aware of what a property will sell for on the open market, you cannot do anything with a property. All decisions regarding a property are based on the price it will receive, Know The Value!!
      The second issue of importance is the law. If you know of a property where money can be made, you do not want to run into legal issues because you structured a deal that is illegal in your state. Yes, states have laws regarding what you can and cannot do with owners who are defaulting on their home loans. Do your research, find out whether your state uses Mortgages or Trust Deeds and the legal timeframes and implications of each.
     The third issue is money. It certainly helps if you've got a good amount to back your purchases, but if you don't, it is not impossible to do deals. You do need enough to be able to find properties, keep track of properties and cover on-going office type expenses. I was once told, "Money should never stop you from doing a deal". It's true. If you have a deal, someone to invest in it is easy to find. If investors don't want to invest, it's not a deal.
     The fourth issue is knowledge. Federal tax liens, partial interests, leased land, property information wrong, unpaid property taxes and wrong common descriptions are all things that have hurt investors. If you are not aware as to how to check for these things, you shouldn't be investing in foreclosures. The things that will make a deal head south are the things that are not obvious.