Since early 2008 and to the present, the Broker, Mr. Ibarra, has sold
over 150+ short sale listings in Maryland, Washington, DC and Northern
Virginia. He's worked with almost every lender in the country in
selling short sale listings to include Bank of America, Wells Fargo,
Chase Home Finance, Ocwen Mortgage, Indy Mac, Litton Loan Servicing,
Specialized Loan Servicing and much more. Mr. Ibarra is a fully
certified Short Sale specialist and has formed an outstanding team of
legal specialists to assist in this tedious process, which can take up
to 3-5 months to officially close. For more information on selling your
property as a short sale, please email Mr. Ibarra directly at firstname.lastname@example.org.
Make sure you follow up with a phone call or a sent him a text directly
at 301-675-9575. Below is an article shared by the Broker for more
Short Sale vs Foreclosure - 10 Common Myths Busted
by Brandon Brittingham on May 9, 2012
It's likely you've heard the term "short sale" thrown around quite a
bit. But what, exactly, is a short sale?
A short sale is when a bank agrees to accept less than the total amount owed
on a mortgage to avoid having to foreclose on the property. This is not a new
practice; banks have been doing short sales for years. Only recently, due to the
current state of the housing market and economy, has this process become a part
of the public consciousness.
To be eligible for a short sale you first have to
To qualify for a short sale:
- Your house must be worth less than you owe on it.
- You must be able to prove that you are the victim of a true financial
hardship, such as a decrease in wages, job loss, or medical condition that has
altered your ability to make the same income as when the loan was originated.
Divorce, estate situations, etc, also qualify.
Now that you have a basic understanding of what a short sale is, there are
some huge misconceptions when it comes to a short sale vs. a foreclosure. We
take the most common myths surrounding both short sales and foreclosures and
give a brief explanation. LET'S BUST SOME MYTHS!!
1.) If you let your home go to foreclosure you are done with the
situation and you can walk away with a clean slate. The reality
is that this couldn't be any farther from the truth in most situations. You
could end up with an IRS tax liability and still owing the bank money. Let me
explain. Please keep in mind that if your property does go into foreclosure you
may be liable for the difference of what is owed on the property versus what is
sells for at auction, in the form of a deficiency balance! Please note this is
state specific and in most states you will be liable for the shortfall, but in
some states the bank may not always be able to pursue the debt. Check your state
law as it varies widely from state to state.
Here is an example of how a deficiency balance
If you owe $200,000 on the property and it sells at auction for $150,000, you
could be liable for the $50,000 difference if your state law allows it.
Not only could you be liable for the difference to the bank, but in some
situations you could also be liable to the IRS! Although there are exemptions
(mostly for principle residences) under the Mortgage Debt Forgiveness Act, there
are times when you could be taxed on both a short sale and a foreclosure, even
in a principle residence situation. Since the tax code on this is a little
complicated and I am not a CPA, I advise always talking to a CPA when in this
situation as you are weighing your options. Hard to believe? Well, believe
it or not, the IRS counts the difference between the sale and the charged off
debt as a "gain" on your taxes. That's right-you lost money and it's counted as
a gain! (I didn't make that rule, that's a wonderful brainchild of the IRS).
Banks and the IRS can go as far as attaching your wages. Not to mention if you
let your home go to foreclosure you will have that on your credit, as well.
Guess What? A short sale can alleviate your liability to the bank,
in most situations. There are also exceptions to this, but in most cases banks
are releasing homeowners from the deficiency balance on a short sale.
2.) There are no options to avoid foreclosure. Now more than
ever, there are options to avoid foreclosure. Besides a short sale, loan
modifications along with deed in lieu are also examples of the many options. In
most cases (but not all) a short sale is the best option. Either way, there are
more options today than there have ever been to avoid foreclosure.
3.) Banks do not want to participate in a short sale, or, it is too
hard to qualify for a short sale. Banks would rather perform a short
sale than a foreclosure any day. A foreclosure takes a long time and creates a
huge expense for the banks; a short sale saves both time and money. Banks have
more foreclosure inventory than ever before, and certainly do not want any more.
Banks more than ever welcome short sales. Qualifying for a short sale is easier
than you think, you need to have a true financial hardship, or a change in your
finances and your house has to be worth less than what you owe on it. Not only
do consumers, but banks also now have government incentive to participate in
4.) Short sales are not that common. At this present time,
short sales range from 10-50 % of sales in various markets and it is predicted
that in 2012 we will have more short sales than any other year, to date. Due to
economic changes in the last few years, this is something that is affecting
millions of Americans. Short sales are in every market, and are not just limited
to any particular income class. This has affected everyone from all facets of
life. A short sale should be looked at as a helpful tool, not a negative
stigma. That is why the government is offering programs that
actually pay consumers to participate in short sales. It is not just affecting
one community; it is affecting communities and consumers across the nation.
5.) The short sale process is too difficult and they often get
denied. Though the short sale process is time consuming; it is not as
difficult as the media would have you believe. The problem is that most short
sales are denied because of a misunderstanding of the process. It is true
that if the short sale process is not followed correctly there is a good chance
of getting denied. An experienced agent knows how to avoid this. Short sales
require a lot of experience, and a special skill set. If you are looking to go
the option of a short sale make sure your agent is skilled and experienced in
6.) Short sales will cost me money out of pocket. A
short sale should not cost you any out of pocket money. In fact, you could get
between $3000-up to $30,000 to participate in a short sale. In many ways, a
short sale may put you in a better financial position than prior to the short
sale. Almost every short sale program now has some type of financial incentive
for the home owner, as long as it is a principle residence, and we are even
seeing relocation money being paid on some investment/second homes. As a seller
of a property you should never have to pay for any short sale cost upfront to
any professional service. Realtors charge a commission that is paid for by the
bank. In most communities there are also non-profits and HUD counselors who can
help you with foreclosure prevention options for free. The only potential cost
you could incur is if the bank would not release you from a deficiency balance
in the short sale, which is happening less and less now.
7.) If I am behind on my payments, I can perform a short sale any
time. The farther you get behind on your payments, the harder it is to
get a short sale approved. The closer a property gets to a foreclosure the
harder it is to convince the bank to perform a short sale. As they get closer to
a foreclosure sale more money is spent, thus deterring them from doing a short
sale. If you think you need to perform a short sale, time is of the essence; the
sooner you start the process, the better. Waiting too long can trigger the
ramifications of a foreclosure, losing the ability to do a short sale as a
8.) I have already been sent a foreclosure notice so I can't perform
a short sale. For the most part just because you received a foreclosure
notice or notice of default it does not mean that you do not have time to
perform a short sale. The timeline and specifics do vary from state to state,
but having done short sales all over the country, I have seen banks postpone a
foreclosure to work a short sale option as close as 30 days prior to the
scheduled foreclosure auction, but the longer you wait the less chance you have.
If you have received a legal foreclosure notice, please reach out to a
professional right away. The longer you wait, and the closer you get to
foreclosure, the fewer options you have. If you have received a notice to
foreclose this means the bank is filing paperwork and starting the process to
take legal action to repossess the house. You still have time at this point to
prevent foreclosure, but do not hesitate! The closer you get to the foreclosure
date the harder it becomes to negotiate with the bank for whichever option you
9.) I was denied for a loan modification, so I know I will get denied
for a short sale. Short sales and loan modifications are handled
by two separate departments at the bank. These processes are totally different
in approval and denial. If you got denied for a modification you can still apply
for a short sale; in some cases you can get a short sale approved faster than a
loan modification, as some loan modifications are denied because they cannot
reduce the loan low enough based on the consumers
10.) If I go through a short sale I cannot buy another house for a
long time. The time to buy another house depends on your entire credit
picture and can vary from 12-24 months. There are even a few FHA programs that
allow for a purchase sooner than that. I have worked with clients who went
through a short sale and bought another house in less than 12 months.
These are just a few of the common myths surrounding short sales and
foreclosure. With the options available today, no homeowner should ever have to
go through foreclosure, and hopefully this information can help a few more
homeowners think twice before walking away from their home not realizing the
possible long term ramifications a foreclosure can have.