Informational Guide




#1  You may be responsible for any defaults after foreclosure. The difference between what you owed plus costs and what the bank was able to sell your home for could result in never ending collections for an indeterminate period of time.  A Short Sale gives you the opportunity to negotiate with the bank to forgive the debt. 


#2   While it may not seem like it now, there will come a time where your current financial troubles will pass. You will feel much better knowing that you did everything possible to avoid the feeling of hopelessness and devastating financial consequence a foreclosure can bring.  There is a light at the other end of the tunnel. Reclaim your life. 


#3   Foreclosures can haunt you forever.  If asked you will have to disclose that you have had a foreclosure on future mortgage applications and job applications from this day forward.


#4   A foreclosure is the most difficult credit item to repair.


#5   Security clearances and government positions including but not limited to the military and law enforcement can be jeopardized by a foreclosure.


#6   It is hard to determine how much a foreclosure will lower your credit score versus a short sale; however they are shown differently on your report.  A foreclosure will show as a "foreclosure."  A short sale may be shown in a variety of ways such as "discharged," "settled for less than owed," or  "pre-foreclosure in redemption." 


#7   A foreclosure will remain on public records for an indefinite amount of time.


#8   The time frame needed to qualify for the purchase of another home on a short sale is normally 2 years.  The time frame for a foreclosure is 3-4 years.


#9   Many banks are accepting Short Sales.  By hiring the right REALTOR® you can possibly avoid foreclosure at no cost to you, with the bank paying all commission and closing costs. 


#10   Avoiding foreclosure may be as easy as calling our Short Sale Team of Consultants for an analysis and possible solutions.






How can I avoid foreclosure?

Your bank may be willing to work out an alternative to foreclosure that may help you save your home or at least prevent a foreclosure.

            Repayment Plan - Your bank may give you a fixed amount of time to repay the amount you are behind, plus late fees, by adding a portion to your regular monthly payment.  This is a good option if you only missed a few payments.

            Loan Modification - Your bank may agree to reduce your interest rate, extend the term of the loan, reduce the balance or add missed payments to the loan balance.

            Forbearance - Your bank may agree to suspend your payments for a period of time.  At the end of this time, you will resume your regular monthly payments, and you may be required to either make one lump sum payment or additional partial payments.  This may be a good option if you have a temporary reduction in income.

            Deed in Lieu of Foreclosure - You voluntarily transfer title to the bank.  You must negotiate with the bank to cancel your debt.  You may have to pay taxes on the debt forgiven.

            Selling your Home - Selling may provide funds needed to pay the mortgage debt in full.  If the value of your home is less than what you owe, your bank may agree to allow a Short Sale.


 What is a Short Sale?

A Short Sale is an arrangement with the bank where they allow the homeowner to sell the property for less than the amount owed on the current mortgage.


 Can I still use the Short Sale option if I have more than one mortgage?

Yes the Short Sale option is still available.  It is a more complicated process, however it can be done.


 Will I owe any money?

Unless you agree in writing to pay a portion of the unpaid debt back to the bank, the Short Sale includes all costs.  The bank's approval of a Short Sale normally includes all closing costs, commission, outstanding liens on the property and the balance remaining used as a short payoff of your mortgage.


 Why would a bank agree to a Short Sale?

If a property is taken back in a foreclosure, the banks know they can only sell the property for market value.  Yet, they have incurred attorney fees, court costs, holding time & maintenance.  If they are able to sell on a Short Sale they avoid these additional costs and still can get market value for the home.


 How do I know if I qualify for a Short Sale?

Your Short Sale Consultant will help you to determine this.  Of course, the final decision is up to the bank; however the basic criteria include three things.

            Financial Hardship - A short definition of financial hardship is a material change in between the day the mortgage was signed and today that has affected your ability to pay. This must be a verifiable issue that has caused you to miss payments or have financial difficulties.  This could include mortgage payment adjustment, job loss, reduction in earnings, too much debt, or business failure.

            Monthly Shortfall - The bank wants to see that the homeowner cannot afford to pay their mortgage.  They will look to see what your monthly shortfall or shortage is when you subtract all your monthly debts from your monthly income.  If you do not have a monthly shortfall now but will have one soon due to a payment increase or pending layoff, etc, the banks will still consider this as long as it can be verified.

            Insolvency - This does not mean you have to be completely broke.  The bank will want to see that you owe more than you have in cash and that over time you will not be able to pay their obligation.


 What must I do to request a Short Sale?

You must gather your financial information and fill out our Short Sale Package.  With this information we can determine if you are a candidate for a Short Sale.  Your bank will make the final approval; however our experience with Short Sales has given us a solid knowledge of what is required.  Your Short Sale Consultant will place your home on the market at a price that is attractive to a buyer and generate activity.  They will advise you on the best possible value.  Traditionally the listing price should be lower than its competition and only slightly higher than the sales price of the most recent, lowest sold comparable property.


 Will I receive any funds from the closing of my home?

There will be no surplus funds available to pay you.  The amount of the mortgage on a Short Sale is higher than the price it sold for.  The bank will have a loss for the unpaid amount of your mortgage plus closing costs.


 Are there any tax ramifications?

A bill was passed to help homeowners in distress.  This is called the Mortgage Forgiveness Debt Relief Act of 2007.  Prior to its passage, a homeowner would be responsible to pay income tax on any amount of the mortgage loan that was not fully paid.  So if you owed $200,000 and only $150,000 was applied to the loan, you would pay income tax on the $50,000 that was left unpaid.  With this Act you would NOT have to pay income tax on the unpaid debt as long as certain conditions are met.  This is an area that you should consult with your accountant.  You can also review the Act on the IRS website (  Once on that homepage, scroll down and click on link "Mortgage workouts, now tax free for many homeowners, claim relief on newly revised IRS form."  Next scroll down to "Frequently asked questions on the Mortgage Forgiveness Debt Relief Act."  We can provide you with the basic criteria from the Act for qualification.  That criteria includes:

  •             Applies to debt forgiven in calendar years 2007 through 2012.
  •             Must be your principle residence.
  •             Debt forgiven must have been to buy, build or improve your principle residence.
  •             Debt that was used for above could have been refinanced and still qualify.
  •             Up to 2 million dollars for a married couple can be forgiven. 


There is hope...  


If you or someone you know is in a situation where they cannot pay their mortgage payment, need to sell their home and feel that the balance due on their mortgage plus the fees associated with selling their home would be more than what they own their lender, please don't let the home be lost to foreclosure!  I have been able to help countless families move on with their lives. DON'T WAIT, ASK ABOUT CONSULTING WITH ONE OF OUR SHORT SALE SPECIALISTS TODAY.




RE/MAX in the Hills is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.