General FAQ: (Important update - see question #29 regarding short sale approvals)
          

1. What is a short sale?
   A short sale is when you get your lender (mortgage holder) to agree to release your mortgage liens so you can sell your home for less than what you owe.
   
   
2. Must the homeowner be 90 days behind in payments to have the lender agree to do
   a short sale?
   
   For most of 2009 and into 2010, the answer has been YES.  This is due to the significant backlog of short sale cases each lender is dealing with.  As a result, lenders are giving higher priority to cases that are closer to foreclosure.   In the past, the homeowner did not have to be behind in payments or in default.  We have represented sellers who are not in default and have good credit - or who have continued making payments up until the short sale. The primary requirement to begin the short sale process is to have an offer to purchase BELOW the outstanding loan balance, supported by a either a loan Pre-approval (not Pre-qualification). If the buyer is applying for a mortgage to buy the home, or statement showing proof of funds if the buyer is making a cash  purchase. The secondary requirement is to have a reasonable hardship explanation to justify the short sale. 
   
   There are exceptions for Government funded mortgages through Fannie Mae or Freddie Mac - where they can require payments to be 30 days late to meet their hardship requirement.
   
   
3. If I agree to sell my home in a short sale, can I still stay in my home during the process? 
   Yes.  Even if you are behind in your payments, you can not be removed from the home unless through a legal judgment like a foreclosure. Also, foreclosure can be delayed or postponed by request if a loss mitigation solution is in progress.
   
   
4. Is it true that a homeowner can do a short sale themselves working directly with the lender or by using a FREE Hud Counselor Service?
   Yes.  That has always been the case. However there are 2 reasons why homeowners choose to work with us.
   
   1) we have negotiated short sales for a long time, are accessible when clients need us, and work to facilitate a transaction that satisfies the needs of the homeowner and the lender.
   
   2) With all the homes in pre-foreclosure in 2009 for example, there are over 90,000 calls coming in to the foreclosure hotlines at the lender and HUD Counseling Offices...homeowners have difficulty getting the help they need. Because the servicer for the mortgage is so backlogged witt loss mitigation and short sale cases,and does not have sufficient resources to handle all the cases, many potential short sales fall through because it takes too long for an approval, and the buyer in the short sale withdraws their offer and buys something else.
   
   
5. If I'm selling my home in a short sale or being foreclosed on, can I get my home back?
   The law in most states gives the homeowner every opportunity to stop the process leading to foreclosure, right up to the foreclosure auction date. In some states there is a period after the foreclosure during which the homeowner can redeem the property (right of redemption.). In New Jersey for example, borrowers have a right to redemption and/or objection within ten (10) days after a foreclosure.  HOWEVER - unlike a foreclosure redemption period, the short sale is considered final and there is no right of redemption. 
   
   
6. What is the difference between short selling and short buying, and do you do both?
   Yes we do both.  Short selling is when we negotiate the release of  the mortgages for a homeowner. Short buying is when we get retained by a buyer to negotiate a short sale in a specific area for the buyer...In either case, everything is contingent on the approval of the seller to allow us to represent their interests with the lender, and the lender approving our short sale terms. 
   
   
7. Don't you have to be a lawyer to represent me in a short sale?
   Absolutely not. As part of our Discovery process, we have you sign a 3rd Party Authorization TO Release Information form that allows us to speak on your behalf to your lender. Many times, we receive short sale cases from attorneys that are not experienced in working them - or who have clients looking into bankruptcy as an option to to avoid foreclosure. At Apex, we have attorneys we we work with if circumstances require.
   
   
8. Is this service just another investor scam to buy my house cheap?
   No.  We are not investors trying to buy your home - our primary focus is to help the homeowner get out from under the debt.
   
   
9. How do you get paid for your services?
   We get paid a modest upfront administrative fee by the seller to prepare the short sale package once a contract is received. This covers our hard costs to put the package together - whether it gets approved or not.  We do not charge the homeowner any fee for negotiating the release of your mortgage lien with your lender or the followup discussions or management of the short sale process.
   
   
10. I get a lot of investor solicitations and calls to buy my house or help me - how do I know I can trust you?
    Trust is a major part of our relationship.  We work very hard to establish that and make sure you understand all your options before you begin working with us.  We understand how difficult it is for a homeowner, especially when you see all the signs on the telephone poles saying "We BUY Houses - No credit, No equity no problem...etc" . We don't rely on cheesy advertising to get clients.  Our credibility is solid because we rely on the referrals from other professionals like: attorneys, title companies, realtors, who have worked with us before.  And, we are not afraid to have you speak to any of them!
    
    
11. How long does it take to complete a short sale?
    A short sale can be closed in as little as 45 days, or take over 6 months depending on the lender and the seller's circumstances.  The average in 2009 has been between 1 and 6 months. If the foreclosure process has already begun, it can be completed quicker depending on the cooperation of the lender.  With so many homeowners in pre-foreclosure and foreclosure, the lenders are backed up.
    
    
12. If I complete a short sale on my home, will I owe any money after my house closes?
    Possibly.  You could be asked by the lender to carry a seperate note for the relieved amount that you will have to pay back, or to contribute cash toward the closing.  You could also have a judgment issued that will require you to pay back the relieved amount, fees and penalties...
    
    
13. Why would a lender consider doing a short sale?
    Because they stand to lose a lot more money than the relieved amount vs. the overhead expense/legal costs of taking the home back in foreclosure.  An exception to that is if the home has significant equity, or if the home is in a location that is has above average appreciation potential.
    
    
14. I've heard that a buyer can buy the home directly from a bank and do a short sale.  How does that work?
    This is a good question that is asked many times...unfortunately, this is not a short sale.  If you buy the home from the bank you are buying a bank owned property that was more than likely  a) foreclosed on, or b) taken back via a "deed-in-lieu".
    
    
15. Will I have to pay capital gains taxes if I sell a property as a short sale?
    No.  Capital gains would indicate that you are in some way "better off" financially because of money you have made. In a short sale, you lose and owe money. The only thing you could possibly be accountable for is the deficiency amount - which will be reported as 1099 income and you WILL have to pay taxes on that, but not as capital gains.  However, some homeowners whose mortgage debt was partly or entirely forgiven may be able to claim special tax relief. Usually, canceled debt is considered taxable income. The Mortgage Forgiveness Debt Relief Act of 2007 allows taxpayers to exclude debt forgiven on their principal residence if the loan balance was less than $2 million ($1 million for a married person filing a separate return).
    
    
16. We are about to buy a short sale from the bank and are wondering if the bank is responsible for ridding the house of mold or are we?
    First of all, if you are buying a house from the bank, it's not a short sale. Second of all, in almost every case where there is a bank-owned property, it will be sold AS-IS. Check the verbiage of your purchase agreement with the bank (or seller). Any purchase agreement should contain a clause referencing who is liable for what. If you signed a purchase agreement that didn't reference the mold or "items required by the home inspection to be completed," then you will be liable. If you are buying a short sale property, the home is being sold "as-is" most times. 
    
    
17. If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency amount?
    In some cases it will and in some cases it won't. It depends on the amount of the deficiency. Usually the mortgage insurance only covers a certain amount. Moreover, the lender will try to collect from you before they file a claim with the mortgage insurance company. The mortgage insurance is not there for your protection, just the lender's.
    
    
18. What is the Mortgage Forgiveness Debt Relief Act of 2007?
    The Mortgage Forgiveness Debt Relief Act of 2007 was enacted on December 20, 2007 (see News Release IR-2008-17). Generally, the Act allows exclusion of income realized as a result of modification of the terms of the mortgage, or foreclosure on your principal residence.
    
    What does that mean?
    Usually, debt that is forgiven or canceled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain canceled debt on your principal residence from income.
    
    Does the Mortgage Forgiveness Debt Relief Act of 2007 apply to all forgiven or canceled debts?
    No, the Act applies only to forgiven or canceled debt used to buy, build or substantially improve your principal residence, or to refinance debt incurred for those purposes.
    
    
19. What about refinanced homes?
    Debt used to refinance your home qualifies for this exclusion, but only up to the extent that the principal balance of the old mortgage, immediately before the refinancing, would have qualified.
    
    Does this provision apply for the 2007 tax year only?
    It applies to qualified debt forgiven in 2007, 2008 or 2009.
    If the forgiven debt is excluded from income, do I have to report it on my tax return?
    Yes. The amount of debt forgiven must be reported on Form 982 and the Form 982 must be attached to your tax return.
    
    
20. Do I have to complete the entire Form 982?
    Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Adjustment), is used for other purposes in addition to reporting the exclusion of forgiveness of qualified principal residence indebtedness. If you are using the form only to report the exclusion of forgiveness of qualified principal residence indebtedness as the result of foreclosure on your principal residence, you only need to complete lines 1e and 2. If you kept ownership of your home and modification of the terms of your mortgage resulted in the forgiveness of qualified principal residence indebtedness, complete lines 1e, 2, and 10b. Always consult with a tax adviser before completing this form following a short sale, to see if you qualify for the tax exemption.
    
    Where can I get this form?
    You can download the form at IRS.gov, or call 1-800-829-3676. If you call to order, please allow 7-10 days for delivery.
    
    
21. How do I know or find out how much was forgiven?
    Your lender should send a Form 1099-C, Cancellation of Debt, by January 31, 2008. The amount of debt forgiven or canceled will be shown in box 2. If this debt is all qualified principal residence indebtedness, the amount shown in box 2 will generally be the amount that you enter on lines 2 and 10b, if applicable, on Form 982.
    
    
22. Can I exclude debt forgiven on my second home, credit card or car loans?
    Not under this provision. Only canceled debt used to buy, build or improve your principal residence or refinance debt incurred for those purposes qualifies for this exclusion.
    
    
23. Is there a limit on the amount of forgiven qualified principal residence indebtedness that can be excluded from income?
    There is no dollar limit if the principal balance of the loan was less than $2 million ($1 million if married filing separately for the tax year) at the time the loan was forgiven. If the balance was greater, see the instructions to Form 982, page 4.
    
    
24. I owe more than my home is worth. Am I eligible for short sale or is my only option foreclosure or bankruptcy?
    We always suggest you consult with your lender and attorney as to what your options are.
    
    Options include: short sale, deed-in-lieu of foreclosure (basically an accelerated voluntary surrender), a loan modification, repayment, or forbearance plan, and foreclosure.
    
    The banks like to prevent foreclosure when at all possible. They've been known to lower people's rates and payments because of all the new defaults in '06 and '07 - this is where the loan modification can occur. Either way, your first stop should be to get information from you lender on what options they provide. 
    
    Keep in mind, most lenders will do as much as possible to try and get you to work things out and keep your loan current without selling via a short sale - regardless of the financial impact to the homeowner.   A popular tactic is to move your missing payments and fees to the back end of your loan, which you will still be required to pay...meanwhile, they will expect you to keep making payments.
    
    
25. Does a good credit score help the seller trying to do the short sale?
    Only inasmuch as their credit score will stay high as long as they don't make any late payments leading up to the short sale. Some lenders may call the deficiency a judgment though, which will hurt the score a bit.   And while late or missing payments can affect your score while pursuing a short sale, it is not as severe a hit as showing a foreclosure or bankruptcy.
    
    
26. How do short sales appear on my credit report?  Isn't it just as bad as a foreclosure?
    No, a short sale is not as bad as foreclosure on your credit.  Short sales appear on your credit report as "pre-foreclosure in redemption" or "Debt Satisfied" depending on the number of past due payments. The impact to your credit score will be much less than the impact of a foreclosure.
    
    
27. What is a deed-in-lieu of foreclosure and should I consider that instead of doing a short sale with my lender?
    A deed-in-lieu is what we call a "friendly foreclosure" that is done by mutual agreement by the homeowner and lender. It allows a mortgagor in default that does not qualify for any HUD Loss Mitigation option to sign the house back over to the mortgage company. To be eligible, the property typically should be owner occupied, no "walk aways" or investment properties.  The mortgagor must be 31 days delinquent or more when the deed-in-lieu is executed. From a credit profile standpoint, this is a better option than just being foreclosed on, or just walking away from the property.  However, a short sale will impact your credit much less than a deed-in-lieu.
    
    
    
28. How complicated is a short sale when you have multiple mortgages or mortgage insurance?
    If you have more than one mortgage, the senior lien holder (1st mortgage) must approve paying the junior lien holders (2nd and 3rd mortgages) amounts that are needed to release those junior liens.  Unless the junior liens get released, the home cannot  be sold in a short sale.  In that case, the home will more likely be sold via foreclosure. (In a foreclosure, the junior liens get removed and the senior lien holder gets the proceeds from the
    sale.
     
    
29. How do short sales get approved?
    Approvals can have several layers.  If for example you have a mortgage with Fannie Mae and your servicer is Wells Fargo, there will likely be two layers of underwriting approvals.  The main one comes from the investor for the loan - Fannie Mae, but Wells Fargo may also have conditions for the approval that need to be met before they present the package to the investor.  If you also have Mortgage Insurance, the MI company may also have requirements that need to be met as a condition of sale approval.