Short Sale Consequences

Deficiency Issues After a Short Sale in Tucson

This is one of the most important aspects of a short sale and something you should have a solid understanding of before entering into the short sale process. The deficiency is the amount of money that the bank will be losing after processing your short sale. We make our offers to your bank contingent upon the bank waiving any and all claims they may have against you. Many agents do not do this! We then get this in writing to you before we move forward and it is at that point we have an approved short sale.

In some cases before your short sale is approved the bank will ask for some portion of their loss to be paid back. The good majority of our clients never have this happen but in a select few cases not every home owner gets to walk away free and clear. The percentages on our end are very low of this happening however it has happened that if the bank is going to lose 100,000 dollars they want 15,000 paid back over a 20 year period as an example. When the terms from the bank come in you have the option to accept or counter it. This varies by state and what laws are in place for that particular state.

Many times this comes down to how good the real estate agent you hired is at negotiating with the bank. This is where experience comes in to play and that can not be taught in a class. The best thing to do is to speak with an experienced short sale agent or real estate attorney who is well-versed and has done a large volume of short sales. They can usually give you an idea of what is going to happen in your particular case and disclose their experience to you.

In completing over 220 short sales we have worked with almost every lender in Tucson and the United States. Therefore it is much easier for our team to give you an idea of what is going to happen before we even get there. We always advise our clients to speak to an attorney about the approval letters before they are signed and have attorneys who can review your approval letter at a minimum cost.

Tax Consequences of Doing a Short Sale

When considering a short sale, Tucson homeowners must also carefully alert themselves to any tax implications which they may be liable for. Normally, the mortgage lender will issue a cancellation of debt for any deficiency they incur and send a 1099 C to the IRS in the year following a short sale transaction. This forgives short sellers for any money which may have been lost by the bank, but it is still the homeowner’s responsibility to investigate whether this event is deemed taxable by the IRS or the state of Arizona.

The Mortgage Debt Relief Act of 2007 is one tax exemption for homeowners completing short sales, and it is applicable to both IRS and federal taxes. If the property was the primary residence of the homeowner, and the property has not been refinanced after purchase for any other ventures, then homeowners will be excluded from paying tax on forgiven debt from a short sale or foreclosure. This provision expires at the end of 2012 and has a capped forgiveness amount of $2 million.

However, some homeowners are still eligible for tax exemption if they can prove that 100% of any refinancing capital was put directly back into the property to carry out repairs or improvements, for example.

If the property is not the primary residence, or homeowners have refinanced the property for any reason, then they may still be exempted from tax on forgiven debt by filing for insolvency with an IRS Form 982. Insolvency tax exclusion is available on an IRS and state level. To qualify for insolvency, the liabilities of homeowners must exceed their assets at time of sale; the outstanding debts of homeowners, in the form of loans, credit card bills, for instance, will need to be greater than the fair market value of the homeowner’s assets, including any stocks and savings which they may hold.

Filing for bankruptcy is also an option which will exclude homeowners from paying tax on forgiven debts resulting from short sales.

It is absolutely crucial that homeowners, who are considering a short sale, individually consult with a qualified tax advisor or accountant before the sale goes through, or they could end up being liable at the end of the year. Tucson Short Sale Specialists are not Tax advisors so the above information is a rough outline of what to expect but not the exact definition of ways to avoid the Tax implications. Depending on your specific situation, a quick call to your accountant or one of ours can give you a feel for what to expect before you make a decision on what your tax liabilities on a Tucson short sale will be.

How to begin a short sale?

We consider this one of the most important aspects of the entire consultation. This section touches a little bit on us and why you should consider hiring us. 5 years ago the need for us to talk about our selves was not necessary as there were only a select few agents actually processing short sales in Tucson back then. However within the past 1 to 2 years more and more agents have decided to take on short sale listings as they are coming on the market in abundance. 5 years ago these agents would simply refer them to us because they made less money and had to work twice as hard to process them.

We began doing short sales in 2005 and it was because we were working in various areas in Tucson, Marana and especially Sahuarita where there was a significant amount of home depreciation. This was in the beginning of the market down turn. Many of those clients had 100% financing, or had major equity lines and had to move because their home was not worth what we could sell it for. They were upside down. Our first short sale was closed in 2005 and I remember obtaining an abundance of listings not only from pleased clients but from agents that heard we did those things called short sales. After analyzing the market and trends in Tucson we decided there will absolutely be a specialty need for this service down the road. Nothing gave us more gratitude to do our jobs than helping home owners who really needed it. In some cases we even worked for free on deals that were very tight in order to avoid the short sale process. Helping homeowners became the reason we went to work everyday and it still is. It was at this point we decided to make short sales our specialty and work on them full time.

The good majority of agents during this time period wouldn’t touch a short sale even if they had nothing else in escrow because they are very difficult. With no experience or education most agents would lose the home to foreclosure (and never get paid for their time) and they didn’t want to put in the work as most short sales are 4 times the amount of work a traditional sale requires. In addition, short sales were sold for less money and the commissions paid by the bank are less.

Since 2005 we have completed over 220 short sales which is more than the majority of major short sale processing companies in the state of Arizona. With over 70 to 80 of those short sales having 2 loans that constitutes around 300 short sale approvals.

At this point in our career we have a 96% success rate on our short sales. This is due to the fact that within our initial consultation and before we ever put your home on the market we have a good idea of who will qualify and who will not. Of the short sales we have lost to foreclosure the majority were put on our desk 1 to 2 weeks before their sale date and the bank did not have sufficient data to make an educated decision. Therefore if we do decide to take on your case as a client our 96% success rate are the odds that you can count on.

Our Relationships with the banks

A very important factor that gives us success doing short sales is the relationships we have developed over the years with the various banks we have worked with. In place of submitting a file into the masses we are able to contact “John” over at Chase or Bank of America and “John” knows we know what we are doing and is willing to expedite our file. Our relationships with the major banks can be a critical aspect in the final outcome of your short sale approval. It is for this reason we are able to get things done for our clients that the good majority of agents and even attorneys can not do here in Tucson because of the solid relationships we have built over the years.

So this is just a little bit about us and why we feel we are unique in the Tucson short sale marketplace as a team and as a group that really has our client’s best interests at heart. We can stress it enough but a short sale costs the seller absolutely nothing. Our fees are completely paid for by the bank. If we do not complete your short sale, we do not get paid. We do not ask for any money up front nor will you ever spend a dime out of pocket on our services!

The decision to work with one of the best short sale specialists in Tucson could possibly be one of the biggest financial decisions of your life. No matter who you choose, it is imperative that you work with someone that is extremely experienced and has a proven track record of success. We have heard time and time again of people who have had horror stories after the short sale of things that were not properly negotiated on their behalf…like deficiency judgments not being waved (in writing).

Its not only important to work with an agent that has experience in facilitating short sales but an agent that has a strong group or team around them is equally important. If the agent you hire is out showing property in place of being on the phone daily like we are negotiating with the banks on your behalf, the chances of getting things done the right way is drastically reduced.

A short sale is not for everyone and there are too many agents out there, especially in this economy that will tell you to do a short sale even when that may not be in your best interest. We are hard working straight shooters that will review your situation and tell you how it’s going to play out because of our years of experience.

Again we offer all of our clients a free 1 hour consultation in person or over the phone where you can get a chance to meet us and we can go over your situation and see if a short sale is right for you. In addition if you know anyone else that could benefit from our video consultation please share this with them or have them give us a call. We are here to help.

Repair Your Credit with Tucson Short Sale Specialists

Our team offers the city’s top credit repair services to help rebuild your credit after the short sale process.

A short sale will cause damage to a homeowner’s credit report for a short amount of time. However, not all short sales affect credit in the same way. If your home is the only thing you are late on and you continue to make payments on other things such as your credit cards and car payments there is a very good chance the rebound time will be shorter than if you are late on everything. In most cases we see our clients back to where they were before the short sale in under 12 months. Individualized credit counseling can help repair the damage that comes from short sales. The credit rebuilding process can be complete in as little as 6 months. We analyze each individual’s credit report separately and recommend strategies for credit restoration. Some of the factors we analyze are:

  1. Number of Defaulted Loans.
  2. Late Payments. Our credit counseling services can help restore credit after addressing late payments that may have come from a Tucson short sale.
  3. Credit history. We can analyze the history of your credit and recommend credit counseling strategies for overcoming defaults in your past credit history.

Every seller’s financial situation is unique. A recent client of ours had a credit score of 765 before the short sale process began and was current on all of her other payables. Her short sale took 4 months from start to finish. After the short sale her credit score was 629. After 6 months of the recordation of the short sale on her credit report she was at 723. This was because she paid her car payment and credit cards on time. Although each persons case is different and a short sale can affect each person differently we are committed to helping you rebound within the least amount of time. FHA guidelines say that after a short sale you can purchase another home within 1 to 2 years in most cases.

Credit counseling is an essential step in rebuilding credit, and rebuilding your life. We explain the step-by-step process it will take to rebuild your credit during the counseling session while you watch your credit increase each month. Without credit rebuilding, a short sale on your credit report can affect your everyday life for many years. Potential employers can view credit reports and even make hiring decisions based on credit scores, insurance rates can increase, and automobile loans or credit cards could be difficult to obtain. We understand the difficulty a short sale can have on your credit and Tucson Short Sale Specialists can help you by rebuilding credit immediately.

Located in Tucson Arizona, the team at Tucson Short Sale Specialists consists of experts in the Credit Rebuilding Process. We help many people each year create financial freedom after the Tucson AZ short sale process.

Contact Tucson Short Sale Specialists today and you will be on your way to a positive financial life after a short sale.