FREQUENTLY ASKED QUESTIONS:

1) What is a Short Sale (Short Payoff or Pre-Foreclosure Sale)?

A Short Sale is a process where the lender looks at the loan(s) which you have with them and determines whether or not the house owes more than its Fair Market Value or has such a small amount of equity that if sold, could not cover the agent or closing costs. When they determine that to be true they will then consider discounting the loan(s) to reflect a price which will facilitate the property to sell on the market.

A short sale, also known as a “short payoff” or a “pre-foreclosure sale”, occurs when a homeowner sells a property for less than what is owed on the loan. Short sales often occur in markets where the property values have decreased and the owners cannot afford to continue making their monthly mortgage payment.

If they were to sell the property in a regular transaction, they would have to bring money in order to effectuate the sale. Given that the borrower is financially insolvent, we negotiate with the lender to accept an amount lower than the actual payoff in order to release the lien. Thus, a short sale requires the lender to approve a discounted payoff that falls “short” of the total amount loaned.

2) When is the best time for me to start the process for my Short Sale?

A Short Sale can be a long process and the earlier you start, the more chances of it being successful. It is best to begin the Short Sale process as soon as you realize that:

• You will be unable to continue making mortgage payments.
• You have an adjustable rate loan that will change within the next couple of months and you will be unable to make the higher payment.
• Your loan owes more than the Fair Market Value of the property and cannot sell for what you currently owe.
• You have little equity in the property which won’t cover the real estate commissions, the closing costs, or any other associated costs you need to cover in order to sell your property.

3) Why would my Lender want to allow a Short Sale to help me?

It’s simple really. Most often a short sale has a far better return on an investment to the lender than a foreclosure. The lender would much rather take a discounted price than have to foreclose on the property and incur all of the costs of a foreclosure and then have to sell the house at auction. This is a very time consuming and costly process for the lenders and they will try to avoid it at all costs.

Given current market conditions where many properties owe more than their fair market value, it is highly probable that no one will purchase it at foreclosure and it will become an REO. Once it’s an REO, the lenders have to maintain and keep the property until it sells. They tend to lower the price of the property even more so that it sells quickly. Banks are in the business of lending money, not owning properties. It becomes very costly to maintain a property and in order to sell the property quickly lenders lower the price considerably.

Not only does the lender receive higher savings when they allow a short sale, they also get paid on the loan 6 months earlier than in the foreclosure process. This allows them to collect and cash-out earlier than they would if they foreclosed on the property.

4) What are all of the costs to me if I chose to have Optima Title Solutions process my Short Sale?

You will never have to pay us directly. We offer an initial, free consultation with no obligation to better understand your case. After you are fully aware of all of your options and it is determined that you would like Optima Title Solutions to handle the short sale we will start working on your case without any cost to you. We understand that you are in a financially difficult situation and as such, we will only charge you if your lender approves the short sale at closing. You will not pay us directly. Instead, our fee will be included in the HUD-1 at settlement and is part of the costs covered by the lender in the discounted payoff.

5) How long does the Short Sale process usually take?

The entire process of a Short Sale generally takes 30 to 90 days (1 to 3 months). Each case is unique and therefore we cannot guarantee a specific amount of time.

6) What is the difference on my Credit between a Foreclosure and a Short Sale?

A Foreclosure will show as A Foreclosure or a debt not paid. It is a very negative mark on your credit that can stay there for up to seven years! A short sale will show as a debt paid or settled. It is a much better mark and will make it easier for you to get credit in the future. Please consult one of the three major creditors for further explanation.

7) What are the liabilities when doing a Short Sale?

The most important one to know about is the form 1099. You will most likely receive this form at the end of the year. The lender has the right to submit a 1099 to you at the end of the year for the discounted value.

The IRS can consider this as income to you and you may be taxed on it at the end of the year. However, you should consult a CPA as there may be a way of reducing your liability by insolvency. See the links provided under Resources.

It is important to note that if a property should go into foreclosure and is sold at auction the difference in the amount you owe on your loan and the price the lender will get on a foreclosure sale is much higher than the discount they will give at a short sale. Therefore the amount reported on the 1099 will be higher and the lender has the option to file a Deficiency Judgment against you.

Completing a successful Short Sale does not necessarily eliminate a Deficiency Judgment but it minimizes the amount of the deficiency or the tax liability you may have. It will also stop you from having a foreclosure on your credit.

8) Why hire Optima Title Solutions?

Optima Title Solutions knowledgeable staff are experts at short-sale negotiations and believe we are a viable solution. We are here for you with answers. We want you to feel confident that you are making the right decision for your specific situation. We work with all our clients in the strictest of confidentiality, integrity and thoroughness. Short Sale Complete is a national company with nationwide resources. You will feel confident with us by your side.

9) Can you negotiate a Short Sale when a home has more than one mortgage?

Yes. The process is the same regardless of the number of liens.

10) Can you guarantee that my short sale will be successful?

We can guarantee that we will do all that is required to complete a successful short sale. Unfortunately we cannot guarantee what the lenders will make as their decision. At Optima Title Solutions we know what the lenders require and are looking for as a discounted price.
This makes our success level much higher.