|Short Sale Guide for Home Owners|
Nevada Short Sale - Questions and Answers (FAQ)
How Long does a short sale take? Why?
The timeline for a short sale approval (does not include the time to market the property, typically 30-120 days, or the time for the due diligence phase of the escrow, typically 30-40 days) can range from as little as 21 days to as much as 4 to 5 months. The times vary based on the lender, whether there are additional lenders or mortgage insurance companies who need to approve, and if the short sale has had any pre-approval work performed such as in a HAFA (Home Affordability Foreclosure Avoidance) short sale.
The time required is determined by a number of factors such as the staffing levels/workload of the approving bank and additional approvals that may be required such as second lien holders, mortgage insurance companies, or secondary market investors. The lender also needs to conduct a BPO (broker price opinion) which is an appraisal-like site visit/analysis done by a real estate broker as well as review all of the financial information that has been submitted from the home seller.
When do I need to move out of my house?
If you are currently living in the property being sold, you can stay in the residence until the close of escrow which is when the new home owners (buyers) would take possession. By occupying the home, it is likely to be better maintained (home and yard) than if it were vacant.
Do I need to be current on my payments?
Generally not. Most lenders will not approve a short sale if the payments are current. In short, if you are making your payments on time, the lender would prefer to have you continue this behavior which directly contradicts your claim that you can not afford the home.
How are broker fees and closing costs paid?
Real estate brokerage fees (commonly called commission) and customary closing costs (which are generally split between buyer and seller) are paid by the lender through the escrow process. Also included in lender paid obligations would be delinquent property taxes and home owner association fees, if applicable. Home owners generally do not pay any of these fees "out of pocket".
Will I need to pay any money?
You might. Depending on your lender's review and their guidelines, you may be asked to either pay "cash at closing" or sign a promissory note, or both. These requirements can sometimes be negotiated, however, many lenders will require these conditions as part of the formal approval.
Can the lender pursue the debt forgiven?
Yes and No. This depends on whether the property is located in a "recourse" or "non recourse" state AND whether the loan has a provision that is either "recourse" or "non recourse". In short, "recourse" means the lender can pursue the forgiven debt through a deficiency judgment; a "non recourse" means the lender can not pursue the funds. The state of Nevada allows loans to be issued as both recourse and non recourse. At the time the short sale approval letter is presented, it is advisable to negotiate language be inserted which will protect the home seller from the lender pursuing a deficiency judgment which can be pursued for up to six years after the sale. As of this writing in 2011, the pursuit of funds through deficiency judgments is not common. Fore more information on this subject, review this blog article and seek professional legal advice.
If you qualify and have been approved for a HAFA (Home Affordability Foreclosure Avoidance) short sale, the lender agrees to waive any deficiency judgment by participating in the program.
Can a relative or business partner buy my house?
Generally, no. Most lenders will require the transaction to be an "arms length" transaction between buyer and seller and require an affidavit signed by all parties to this effect. The "arms length" transaction prohibits a relative by blood or marriage as well as business partners from purchasing the property.
Can I rent my house from the new owner?
Generally, no. Most lenders require the home owner to vacate the property and to have no intentions or agreements (verbal or written) to rent or lease the property after the sale.
Can my home be foreclosed on during the short sale process?
Yes. The foreclosure process can, however, be extended to allow for the short sale to close. The request for any extension on a trustee sale (the event immediately before repossession by the bank) must be made and agreed to by the lender. For this reason, it is imperative that you keep your real estate agent informed of all formal documents you receive from your lender - especially the Notice of Default and Notice of Trustee Sale.
Can the short sale be denied by the lender?
Yes. If your personal financial situation does not meet the lender's requirements for an approval, you can be denied.
Will I owe taxes on the debt forgiven?
For a non-owner occupied property, you may be liable for the taxes on the debt forgiven. For owner occupied properties, The Mortgage Forgiveness Debt Relief Act and Debt Cancellation does not require you to pay taxes on the debt forgiven through 2012 providing you meet all of the Act's stated requirements. In any case, you should discuss this with a professional tax advisor.
Notice: The information on this page pertains to the state of Nevada. This information is drawn from recent short sale real estate sales in Reno, Sparks, Carson City, Dayton, Minden, Gardnerville, Genoa (Carson Valley), and Lake Tahoe as well as multiple national resources, banks, and government agencies. This information is subject to change at anytime and while, believed to be accurate, is not guaranteed. Real Estate brokers who specialize in selling Reno/Sparks short sale homes are not qualified to give legal or tax advice and home sellers are advised to seek independent professional legal and tax advice.
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