Short Sale Protection

What does a Short Sale Package entail?

Always take note that a short sale in Arizona is approved for the banks best interest, not yours! For a lender a short sale is a more cost efficient and cost effective solution to a homeowner in pre-foreclosure. 

 A bank needs documentation proving that you are a victim of hardship in order to complete a short sale request. Short Sale Package entails the following: 

• Current Financial Statement.
• Two Years Tax Returns And W-2’s.
• Hardship Letter from the homeowner explaining their extenuating circumstances.
• Two Most Recent Pay Check Stubs.  
•  Two Most Recent Bank And Retirement Account Statements.
• Any Documents Supporting The Hardship.
• Letter Of Authorization: This gives HomeLoanSolution.com or your realtor the authorization to speak with your on your behalf.
• Current Market Analysis (CMA) or (BPO) Typically from a Realtor or appraiser.
• Estimated Net Sheet Or HUD-1 (Your Realtor or investment company will provide this document.
• A Copy Of The Executed Sales Contract With Buyers Proof Of Funds Or LSR.

  

  We package the Short Sale Packet together and fax or email to your lender. There is a least a 2 week turn around before the lender inputs into the system and assigns a Loss Mitigator. Once the offer along with the entire short sale package is processed into the  system, the lender will order a Brokers Price Opinion (BPO) to establish value.

The Key To A Successful Short Sale is the BPO, which a realtor visiting your home and establishing market value! The lower your BPO the better, therefore, it is always best for the realtor or Home Loan Solution agent to meet up with the Broker at the home to make sure an accurate opinion is taken.

Most homeowners  experience the following  financial hardships which may include:

Here are some basic tips to remember when writing your short sale hardship letter:

• Names, dates and loan #'s.
• Explain your financial situation as well the hardship it has caused your family.
• Have a “call to action” of what exactly do you want the lender to do.
• Explain to them that you understand that will not be receiving any proceeds from the sale of the home.
• I would type out the letter then fax or email it. 

What Are The Ramifications Of A Short Sale?

The Credit Ramifications of a Short Sale and a foreclosure vary substantially . A Short Sale may drop you credit score by 150-200 points, however, you can recover alot quicker from a short sale than a foreclosure. Your credit report may have a lender reporting as a Settlement or Pre-Foreclosure. Since most lenders will not consider reviewing a Short Sale until a few payments have actually been missed you may also have 30 or 60 day late payments on your credit report.  We will suggest to you a good credit repair program! We recommend http://www.goclean.com/ to assist in cleaning up your credit report. We may be able to convince the lender to not report the short sale to your credit report agencies, however, those institutions have an automated reporting systems and it's impossible to exclude one borrower. A letter issued by the lender on your behalf will suffice for a request of deleted item on your credit report.

A foreclosure on your credit will take 7-10 years to remove and can lower your credit score by 250-280 points. So unless you have exhausted every option to avoid foreclosure would not recommend foreclosure as an option.

Tax Consequences Of A Short Sale?

Many homeowners are unaware that Arizona is an anti-defeciency judgement state, so unless you refianced and used the monies for something other than to improve the house, then possible short sale tax issues can arise. A Homeowner considering a Short Sale should absolutely discuss these possible issues with an attorney or accountant. If your lender chooses to, they could send you an IRS Form 1099-C: Cancellation of Debt at the end of the year. What are the odds that you have extra tax money lying around after you just went through an Arizona short sale on your home?

The Mortgage Forgiveness Debt Relief Act of 2007 would eliminate the tax owed on any forgiven mortgage debt. The bill permanently eliminates tax on up to $2 million of debt for a principal residence. This bill protects owner occupied homes up to 2 acres. The bill is retroactive to January 1st, 2007. http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html

IRS FORM 982

If you are not protected under the new Mortgage Forgiveness Debt Relief Act of 2007, you still have a way to eliminate tax consequences of a Short Sale. If you receive a 1099-C from your lender then you must report the amount of the canceled debt as income to the IRS, even though you did receive any, it's called (phantom income).  (The amount shown in Box 2 of the 1099-C form is the amount that must be reported). The IRS recognizes “Insolvency” where cancelled debt might not have to be reported as income. Insolvency is your total debts exceeding your total assets at the time your debt was settled.

If you are insolvent you should: 1) Fill out IRS Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness (http://www.irs.gov/pub/irs-pdf/f982.pdf) or 2) Attach a detailed Insolvency letter to your tax return explaining that your total debts exceeds assets.  

You accountant can help qualify your insolvency and help you fill out any IRS Forms. If the bank accepts a Short Sale, your foreclosure is canceled, and you sell your home for less than the principal amount owed. The new House Bill H.R. 1876 should protect you from federal taxes, but if  for some reason you do not qualify, and you receive a 1099-C: Cancellation of Debt at the end of the year, you still have options! Ask your accountant about the IRS Form 982: Reduction of Tax Attributes Due to Discharge of Indebtedness (http://www.irs.gov/pub/irs-pdf/f982.pdf). If you can prove your insolvency (your expenses outweigh your income) then you should qualify for an exemption and not be taxed on the deficiency.

Why Use Home-Loan-Solution.com To Assist In Your Short Sale?

The Arizona Short Sale Experts at HomeLoanSolution.com empathizes with your financial situation.  This is why when you decide to do a Short sale in Arizona with us, we set you up with a Home loan Solution Auditor so we can work together to complete your Arizona Short Sale.  We will set you up with a Realtor will represent you in the current retail market.  We set you up with an Arizona Short Sale Auditor that funnels all the information needed  on your behalf.  Our Arizona Short Sale transaction software will keep you up to date with the details of your Short Sale as well as keeping Arizona Short Sales Team more cost efficient and cost effective.  Lastly, we have a CPA and Attorney on staff to assist in the Arizona short sale process.  We don't wait for a buyer to find us, we have a network of over 10,0000 investors, realtors and wholesalers who consistently buy from our inventory.  

Please fill out our submit form and one of our short sale mitigators will contact you immediately.  Feel like talking to a live person then give us a call. We look forward to helping you and your family avoid Arizona Foreclosure and Short Sale your home today.

HomeLoanSolution.com & Partners prides itself on supporting those looking to buy or sell property. Below you will find helpful resources that will help you on your journey. If you have any questions, feel free to contact our Short Sale Department at (602-694-5649) for a NO obligation FREE consultation. We are here to support you!