Casa Grande, Arizona City and Coolidge Arizona real estate listings, home buying, selling and relocation information

Recent news reports have mentioned that there is little difference between a short sale and foreclosure on your credit report. While things change every day, no one at this point can absolutely predict the impact on your credit. Here's a chart that explains the differences between a short sale and a foreclosure in regards to your credit report.
Foreclosure vs. Short Sale Homeowner Consequences

Please note that in Arizona, lenders are prohibited by statute (33-729) from obtaining deficiency judgments in foreclosures where the land size is 2.5 acres or less and where the property was used as either a single one-family or single two-family dwelling.

We attempt to be accurate in the information we post on this site. We are not attorneys or tax advisors. Please seek legal and tax advice from professionals in those fields.

Q: Would I qualify for a short sale?

A: There are 3 main qualifications for a short sale candidate:

1. A good candidate is a homeowner who is currently behind or may fall behind on their mortgage payment(s) and is unable to keep up with all of their monthly obligations. Having a financial hardship is an important part of the bank’s review process. Some reasons for falling behind on your mortgage payment(s) may include sudden change in monthly household income, loss of job, business failure, divorce, sudden medical obligations, forced job relocation, military service, and more. The ‘hardship’ must fit a list of criteria and be documentable.

2. A good candidate also has no equity in their home. They are not able to sell their home and pay off all of the outstanding loans that are secured against their property.

3. A good candidate must also be insolvent, meaning they have no other assets that can be used to pay the difference.

Q: How do I select the right team to successfully manage and negotiate my short sale?

A: Before hiring just any ‘Agent’ to assist you in a short sale, make sure they are qualified and understand all the work that is required to see you through to the end. A properly trained short sale agent knows how to qualify you for a short sale transaction and therefore has a very high success rate. Not all Realtors® understand how to qualify you and your lender for a short sale transaction. This is one of the reasons they often have low success rates when it comes to closing a short sale. The typical success rate of short sales is about 10 to 12% nationwide. Our team has been extensively trained and certified as Certified Distressed Property Experts (CDPE’s). We chose this extensive training and certification because Realtors® with the CDPE average an 82% success ratio with short sales.

Be smart and make sure that you ask many questions before trusting your future, your credit and your financial situation with a self-proclaimed ‘expert’ that may have just learned about short sales from a title or escrow company.

Q: How long does it take to do a short sale?

A: There are several stages that are involved with the short sale process...

1. The first stage requires working with you, the homeowner, to get all of the required documentation that your lender will require us to send them. This stage shouldn't take longer than a couple of days. We will provide you with a list of documents that you will need to assemble, you may also download a copy of this list by clicking here. We will also need copies of all documents sent to you by your mortgage company.

2. The second stage involves us preparing the listing paperwork and scheduling an appointment with you to see your home and prepare it to be listed for sale. This stage only takes a few days as well.

3. The third stage entails us aggressively marketing your home for sale and producing a willing, ready, and able buyer. This stage can take as little as a few days or as long as a few months.

4. The fourth stage is the actual presentation of the offer to your bank. This is where our expertise in negotiating short sales takes place. The actual negotiation/ approval process can take as little as 2 weeks or as much as 3 months. On average, most short sales take between 30-60 days from the date the offer is presented to the lender to the date of the short sale approval. In most cases, 60-90 phone calls and faxes back and forth between the lender and our team are required. The process is usually not described as 'fast' in most cases, but with the right team working on your behalf, you can be at rest knowing that everything is being handled diligently and with much care.

5. The fifth and last stage to the short sale process is the period of time between the short sale approval from the bank and the buyer closing on the home. We prepare all of the buyers we work with to be ready to close in as quickly as 3 weeks from the time of short sale approval. Often buyers will even close in as little as 10-14 days.

Q: Are there any tax ramifcations to a short sale?

A: You may have heard, "Don't do a short sale because you will get a 1099 and have to pay taxes on the difference between what you owed on your home and what you sold it for or the amount the bank wrote off." This is true, but it isn't the whole story...

If you do a short sale you will receive a 1099 from your bank. This 1099 is called a "1099-C". The thing that most people don't know or don't tell you is that with a foreclosure you will also get a 1099. In the case of a foreclosure, it is called a "1099-A".

So what's the difference between a 1099-C and a 1099-A? The "C" stands for "Cancellation of Debt" and the "A" stnads for "Acquisition or Abandonment of Secured Property". It is important to know while there are many differences, the tax consequences for the "C" and the "A" are the same. You may not be required to pay taxes on the income as shown on the 1099-C, but don't just assume that you won't have to. Before making your final decision, first consult your CPA or tax preparer. While we are very good at successfully closing short sales, we are not tax experts. Please consult a professional CPA or tax preparer before beginning the short sale process.

One more thing you should know is that in approximately 99% of the cases, the amount of the loss at a foreclosure is greater than that of a short sale. If you are going to receive a 1099 in either case, it is in your best interest to do a short sale instead of allowing your property to be sold for less at foreclosure or as an REO(Real Estate or Bank Owned Property). Now that you know this, don't allow rumors or incorrect information influence an important decision in your life. Losing your home to foreclosure is always the last resort and you should seriously look at all of your options before letting your home go to foreclosure.

Q: Are there any credit consequences to a short sale?

A: This question is asked very frequently and has many different variables involved. The first thing to keep in mind is that the moment you go 30+ days behind on your mortgage payment, your bank has the right to report to all of the credit bureaus that you are 30 days behind on your payments. When a late payment is reported to the three major credit bureaus, it does have a direct affect on your credit. After going through a short sale or a foreclosure, most people have multiple 30, 60, 90+ days late payments reporting on their credit report.

When the actual short sale is completed, most banks will report to your credit report that your account was "paid in full for less than the full amount". Your credit report may also be marked as "settled". It is important to keep in mind that each lender has a different way of reporting that a short sale was done, but this is the most common language that is seen. Once a foreclosure is filed, it will show in the public records portion of your credit report, as well as in the credit portion. In reality, a foreclosure notation will probably show twice on a credit report.

It is difficult to gauge how much a short sale or foreclosure will affect a credit score. Credit experts will agree that neither a short sale nor a foreclosure is favorable to your credit or credit score. However, the impact of a foreclosure is much worse. We strongly advise you to work with a credit and credit scoring expert for more specifics on this topic as well as ways in which to improve your credit after the short sale is complete.

Q: What documentation do you need to help me with this process?

A: The first thing we will need is the authorization form. This form gives the bank your permission to speak to us. Click here to download the Authorization to Release Information Form.

There are also a few items that you will need to bring with you to our first appointment. Click here to download our document checklist.

Another important document is a financial worksheet. This is a good thing to get started before you come in to your first appointment. You may need to look up some information to complete this form. Click here to download our Homeowner Financial Worksheet.

Possibly one of the most important items we must include along with our short sale package is a hardship letter. This letter must give an explanation as to why you are not able to continue to make the payments on the property. Here are a few examples:

Yost Realty Group, REALTOR®, real estate agents and broker for Casa Grande, Arizona City and Coolidge Arizona home listings, property and land for sale - NUMBER1EXPERT(tm)

	Yost Realty Group RE/MAX Casa Grande 317 E. Cottonwood Lane, Suite C Casa Grande, AZ 85222 520-836-1717 800-305-9678 Fax: 520-836-1177 Email: Info@YostHomes.com
	We're known as Casa Grande's Home Team because we're the real estate professionals who know this area best! We've lived here since 1977, have raised our family here, and since the early '80's have helped more Casa Grande area families with their home buying and selling needs than anyone else!

www.YostHomes.com is brought to you by Yost Realty Group
NUMBER1EXPERTS™ for Casa Grande real estate, Arizona

Read our Privacy Guarantee, Terms of Service, and Free & Without Obligation Pledge