When to Short Sale in Jacksonville Florida
Sellers: What to Do When the Sale Price Leaves You Short
If you’re thinking of selling your home, and you expect that the total amount you owe on your mortgage will be greater than the selling price of your home, you may be facing a short sale. A short sale is one where the net proceeds from the sale won’t cover your total mortgage obligation and closing costs, and you don’t have other sources of money to cover the deficiency. A short sale is different from a foreclosure, which is when your lender takes title of your home through a lengthy legal process and then sells it.
1. Consider loan modification first. If you are thinking of selling your home because of financial difficulties and you anticipate a short sale, first contact your lender to see if it has any programs to help you stay in your home. Your lender may agree to a modification such as:
- Refinancing your loan at a lower interest rate
- Providing a different payment plan to help you get caught up
- Providing a forbearance period if your situation is temporary
When a loan modification still isn’t enough to relieve your financial problems, a short sale could be your best option if
- Your property is worth less than the total mortgage you owe on it.
- You have a financial hardship, such as a job loss or major medical bills.
- You have contacted your lender and it is willing to entertain a short sale.
2. Hire a qualified team. The first step to a short sale is to hire a qualified real estate professional and a real estate attorney who specialize in short sales. Short sales have proliferated only in the last few years, so it may be hard to find practitioners who have experience in short sales. You want to work with those who demonstrate a thorough working knowledge of the short-sale process and who won’t try to take advantage of your situation or pressure you to do something that isn’t in your best interest.
3. Begin gathering documentation before any offers come in. Your lender will give you a list of documents it requires to consider a short sale. The short-sale “package” that accompanies any offer is usually quite extensive and this is another reason to have a realtor that is certified as a Short Sale & Foreclosure Resource by the National Association of Realtors and a “real estate attorney” who is experienced in working on your behalf with the lender. The attorney usually is paid by the lender at closing.
4. Prepare buyers for a lengthy waiting period. Even if you’re well organized and have all the documents in place, be prepared for a long process. Waiting for your lender’s review of the short-sale package can take several weeks to months. . If you have more than one mortgage with more than one lender the process can take 3 months or more.
When the bank does respond, it can approved the short sale, make a counteroffer, or deny the short sale. The last two actions can lengthen the process or put you back at square one. (Your real estate attorney and real estate professional, with your authorization, can work your lender’s loss mitigation department on your behalf to prepare the proper documentation and speed the process along.)
5. Don’t expect a short sale to solve your financial problems. Even if your lender does approve the short sale, it may not be the end of all your financial woes. Here are some things to keep in mind:
- You may be asked by your lender to sign a promissory note agreeing to pay back the amount of your loan not paid off by the short sale. If your financial hardship is permanent and you can ‘t pay back the balance, talk with your real estate attorney about your options.
- Any amount of your mortgage that is forgiven by your lender is typically considered income, and you may have to pay taxes on that amount. Under a temporary measure passed in 2007, the Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act, homeowners can exclude debt forgiveness on their federal tax returns from income for loans discharged in calendar years 2007 through 2012. Be sure to consult your real estate attorney and your accountant to see whether you qualify.
- Having a portion of our debt forgiven may have an adverse effect on your credit score. However, a short sale will impact your credit score less than foreclosure
Remember only Realtors Certified as a Short Sale and Foreclosure Resource have the knowledge to help you navigate the process of “how to short sale”.
Peter Gentry, BSIM, SFR
Florida Commercial Real Estate Services LLC
Florida Licensed Real Estate Broker
Certified Short Sales and Foreclosure Resource
(904) 371-3941 Fax
(904) 612-4999 cell
Chair, Commercial Alliance of Realtors Council, Northeast Florida Association of Realtors
A Small Business Leader for 2011, Jax Chamber- Downtown Council
Vice President, JaxChamber Downtown Council – 2012