Representing Sellers and Buyers of Homes and Other Real Estate

Wills, Trusts, Living Trusts, Powers of Attorney and Other Estate Planning

Law Offices of James B. Spina, Ltd.

Experience Counts

Serving the Chicago Metropolitan Area since 1979

QUESTIONS AND ANSWERS ON "SHORT SALES"

What is a short sale?

A home owner who cannot make the mortgage payments may choose to sell the property to avoid foreclosure.  In a falling real estate market, home values can drop enough that the house cannot be sold for price high enough to pay off the mortgage loan in full.  Under certain conditions, the mortgage lender may agree to release its lien on the property in exchange for payment of less than the full amount due.  The resulting transaction is commonly known as a “short sale.”

 What does a short sale do to my credit?

Mortgage lenders commonly inform credit reporting agencies that the unpaid balance has been “charged off” as uncollected.  This is a negative entry on your credit report that will damage your credit.  However, this damage is probably less than that caused by a completed foreclosure. 

Will I be liable for the balance; the difference between the amount owed and the amount actually paid on the mortgage loan?

 Your attorney will generally attempt to negotiate an agreement under which you are released from paying the balance on the mortgage loan.  However, lenders often retain the right to collect the balance.  The good news is that the balance is unsecured and may be discharged in bankruptcy.

 Will I be required to pay real estate commissions, attorneys’ fees, or closing costs?

 A competent attorney can usually negotiate a transaction that does not require you to pay anything at closing.

 Will a short sale affect my income tax?

 The home owner may be sent an IRS Form 1099 showing the amount charged off as taxable income to the home owner. 

 Will I receive anything at all from the short sale?

 Sometimes, but not always, the attorney can negotiate with the mortgage lender for the home owner to receive a small payment from closing.  It depends on the lender, the circumstances of the sale, and other mortgages or liens that must be paid from closing.

 What happens to my second mortgage or equity credit line in a short sale?

 Your attorney will generally attempt to negotiate a small payoff in exchange for release of a second mortgage or equity credit line.

 Are my credit card bills affected by a short sale?

 Any unsecured debt that you may have, such as credit cards, remains unaffected by the short sale.

 Once a sale contract is signed, how long does it take to close a short sale?

 The time it takes for closing varies greatly.  It might take only a few weeks for a cash transaction, but eight weeks, often more, is common when the buyer is obtaining a mortgage loan.     

 How do I select an attorney or Realtor for a short sale?

 In real estate matters, there is no substitute for experience.  Do not hesitate to ask the attorney or Realtor about the length of time they have been in practice, and the number of short sales they have handled.  In any case, your attorney and Realtor must be people whom you feel you can trust.

 Where can I get more information?

 A well-experienced Realtor can often provide valuable information, but it is wise to also call an attorney who is experienced in dealing with short sales.

Call for a free telephone consultation today

708-647-1900

jbs@SpinaLaw.com

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