Short Sales: Frequently Asked Questions

  1. What is a short sale?

In general, a Phoenix Short Sale is completed when someone sells their property for less than what they owe. This requires the lender’s approval of the sale. There are many different factors that go into the decision of the lender to approve the sale, and that is why it is very important to have an Arizona Short Sale Agent that has experience in negotiating Phoenix Short Sales with a comprehensive understanding of Arizona state law. If you’re looking for an experienced Arizona Short Sale Realtor you have arrived at the right website.

  1. Why would my lender agree to do a Short Sale?

Quick background: Lenders are not in the business of owning and holding property. They make their money by lending and collecting money (capital) and keeping their money circulating. Lenders are required to hold a certain amount of reserves on their books with respect to the money they lend out. Therefore, when their capital is tied up in properties that are in default (non-performing assets), they are hindered by the amount of money they can lend. If they are hindered by the amount of money they can lend, then they aren’t able to make money dealing a huge blow to their revenue-producing business model.
Consequently, they are very motivated to dispose of these properties in default as soon as they can. Furthermore, by transacting a phoenix short sale they are able to recapture more money as opposed to foreclosing on the property in most cases. This is especially true in a declining market where property values are sliding on a monthly, quarterly, or yearly basis.
Lastly, Arizona is what is known as an anti-deficiency state.  This law is very protective of homeowners in default so lenders are motivated to work with Arizona homeowners to transact a short sale.

  1. Is a Short Sale right for me?

If you are underwater and have no equity you do have several options. However, at this point in time, it is of our professional opinion that an underwater homeowner’s best option is a short sale. Why? Because it allows you to start over with your financial situation and begin rebuilding immediately with the lease financial and credit damage of any other option available. Furthermore, the government has passed recent initiatives to incentivize lenders to complete short sales because they know that short sales are the best option for ALL PARTIES in order to get our housing market on track the soonest with the least amount of stress and pain. Please refer to the Making Home Affordable Act as there are 7 to 9 million homeowners who may be eligible under the guidelines of this program and there are tools on this site to provide you with a self-assessment.
Another helpful RESOURCE (HUD): 877.448.1211

  1. How do I get started? If you’re late – Don’t waste anymore time, best time is now!

This truly is a simple process to get started.  There is a step by step short sale system that our team has in place to guide you exactly through the process of how you get started from point A to point Z. There will be documentation that you will have to collect to submit to the lender that will become part of the complete short sale package that your bank will require. But don’t worry; you have come to the right place.  We are a successful short sale team who has the insight to negotiate the release of the lien on your property AND the release of your debt so that you are protected from lenders potential future rights (if they are applicable) to come after you for the debt that was discharged from the completion of an Arizona Short Sale.

  1. What lenders look for when doing an Arizona Short Sale?

Banks and lenders look for hardships from the homeowner. There are many different hardships the lender will consider when reviewing a short sale application and package. The most common hardship is the FINANCIAL HARDSHIP.
A FINANCIAL HARDSHIP can consist of a broad array of things:
a) Loss of job/employment: This is a slam dunk with the banks. This hardship is as obvious as it gets as anyone who loses their job will have their income directly affected. Even if you loss your job but still have severance or unemployment pay income coming in, we can still proceed with your short sale because the lender understands that this income is temporary.
b) Adjustable interest rate on your mortgage goes up: This is considered a financial hardship as well even if there is no loss of income. Why? Because now your monthly payment has increased which can send shock waves through out your budget, causing other areas of expenses to be pinched or not able to be paid. This is the definition of a financial hardship as now your monthly mortgage payment is no longer affordable.
c) Curtailment of income: Maybe you still have your job and your work income is steady, but you were relying on additional income to cover your expenses including your mortgage payment. This could be things like child support, dividend income, etc. This is a financial hardship.
There are other valid, qualified hardships that we have identified for your review in our Short Sale Information section.
Once a valid hardship has been identified, then your lender will review the comprehensive short sale package that the Cook & Associates Real Estate Advisors has put together and submitted on your behalf. We then start aggressively negotiating with your lender to ultimately reach an amicable solution.

  1. When will the Mortgage Forgiveness Debt Relief Act be expiring?

The piece of legislature that was signed into law in 2007 is currently in place and set to expire December 31, 2012.  This law has helped countless homeowners and relieved them from their tax liabilities.  If this law does in fact expire at the end of 2012, this will have a profound effect on the short sale industry.  You will want to start your short sale well ahead of the end of 2012.  The Cook & Associates Real Estate Advisors recommends starting as soon as possible, as some short sales can take up to 12 months.

  1. Is a Short Sale better than a foreclosure?

Do not put your head in the sand! YOU DO HAVE THE OPTION of a short sale that will greatly benefit you as opposed to a foreclosure.  A short sale will benefit you from a credit standpoint and most likely a legal standpoint.  Contact us for more details about your specific situation.

  1. How long does a Short Sale take?

A Short Sale on average takes 90 days from start to finish. There are many different aspects that go into the time that it takes for a bank to approve a short sale.  Let the Cook & Associates Real Estate Advisors assist you in this complicated process.
A very important thing the agent can do is put together a comprehensive short sale package that is organized and efficient so that the lender can review it with very little effort. If the short sale package is submitted to the lender for review and it is not SPECIFICALLY packaged the correct way, this will significantly decrease the amount of time that it takes to gain approval from the lender. In addition, the bank’s negotiator may not even review the package in time to save the property from foreclosure so this is critically important.
A good Short Sale Agent will maximize their clients leverage by knowing Arizona state statute so they know how to negotiate with the bank to get the Arizona Short Sale done in the fastest time possible.

  1. Are there disadvantages to doing an Short Sale?

There are implications when conducting a Short Sale that depend strictly on the outcome of when the short sale is negotiated and finalized. There are three main impacts when dealing with a short sale in the Phoenix and Arizona area.
Credit – A short sale will have a negative impact on your credit score because you have not been making your monthly payments while your short sale is being negotiated. By the time the short sale is complete; your credit could be lowered 100 to 200 points although there is no way to know exactly how much your credit could be impacted. Our team will help you located a credit repair company to get your credit back on the right path quickly.
Tax – The IRS counts the difference between the amount you short sold your home for and the amount you owed on the property prior to selling it as “phantom income” even though the homeowner never saw a penny of this. For example, if you currently owe $250,000 on your house and it was short sold for $200,000, the IRS would count the difference of $50,000 as taxable income. However, new federal legislation was passed into law December 20, 2007 making it retroactive to include any short sales from January 1, 2007 through December 31, 2012. This act protects your primary residence from having this dollar amount counting as taxable income. Please consult your tax professional for further information.
Deficiency – This is what a lender can file against a borrower in an attempt to collect from the borrower the money they did not pay. Arizona is an anti-deficiency state thus making it very difficult for a lender to pursue a borrower for the money that was not paid; however, it is not impossible. Know your rights; consult an attorney for further clarification, we can refer one to you if needed.

  1. Is there a certain time of year I should start?

Anytime is a good time to complete a Short Sale. There is no time like the present to start a short sale. The federal government is incentivizing banks to complete short sales with their HAMP/HAFA program in which they will pay $1,000 for the banks administrative costs and/or pay you up to $3,000 of relocation assistance!  Contact the Cook & Associates Real Estate Advisors today to get started!

  1. Can I negotiate my own Arizona Short Sale?

This will be very difficult to do for many reasons.  Most importantly, the lender will not allow you to discount your own loan. It will be hard to make a compelling argument on your own behalf. Also, the bank will require is Listing Agreement with a broker licensed in the state of Arizona.  This shows the bank that you are actively trying to sell your property and are serious about doing so.  Without the Listing Agreement and a purchase contract your negotiations with the bank will not go very far. Contact us to negotiate your Phoenix metro area short sale today!

  1. STOP Foreclosure! Free – No obligation foreclosure consultation.

We will help you prevent foreclosure. Once you call, one of our experience agents will give you an in-depth phone consultation where we will cover all aspects of your situation to make sure the best route is taken to get you out of your current situation and prevent foreclosure.  We will also offer to come meet you at your house or place of your choice to discuss your situation.
You may also have noticed that I’m offering you a FREE Report to explain your options and help you decide on a course of action. The idea of losing a home can be overwhelming, and I feel it is vital for you to have all the facts necessary to make an informed decision.

  1. CALL to ACTION: You must not delay – Act quickly as Arizona’s foreclosure process from time of posting on Notice of Default list to auction is only 90 days.

Time is of the essence so if you are already late on your mortgage you must contact us quickly. We will work hard to get your trustee sale date postponed if needed to ensure enough time for the bank to review your short sale package. It is never too late to pursue a short sale as we have been very successful negotiating the postponement of a trustee sale just days ahead of its scheduled date.

  1. What if I am facing foreclosure and have no money to sell?

No money No problem! No equity No problem! This process is FREE! Short sales are designed to help people in this exact situation. YOU DO NOT PAY US A DIME! We negotiate our fee with the bank; therefore, the bank pays our fee. Furthermore, the bank will pay your closing costs in the loan as well so you will not have to incur any closing costs.
The one exception to this is Homeowners Association (HOA) dues. Arizona is not a Super Lien state meaning that banks do not have to pay delinquent HOA dues in order to convey clear title to the next buyer on the short sale. Therefore, we recommend that if you have the ability to keep your HOA dues current, do so. If you absolutely cannot, then our team will do our very best to negotiate those costs into the deal so that the bank will end up paying for them as we have been successful doing many times in the past.

  1. Is my house too cheap or expensive to transact a Short Sale?

No. We have short sold many different homes in all price ranges in the Phoenix Arizona metro area. Lenders will short sale any property no matter the price or amount of money owed on the property.
Contact the Cook & Associates Real Estate Advisors today for a FREE consultation.  We take the time to listen and answer questions you may have.  We look forward to hearing from you soon.