I was talking to an old friend yesterday in the DC area and it really drove home how little many sellers understand about short sales.  This friend has just gone through a divorce and her ex-husbands name is not on the loan so he left her with the house (that has his name on the title) which she can't afford by herself.  Besides her story being heartbreaking on a personal level, I was surprised about how little she had been told about short sales when agreeing to list her home with an area agent.

When I was talking to her and mentioned "deficiency judgment" she asked what a deficiency judgment is.  This led me to wonder how many sellers don't understand the whole picture and what short sales involve.

Here are a few things that we wish all of the sellers of Jacksonville short sales knew:

  1. The bank is NOT obligated to work with you.  We have to build a "case" to convince them why they should.  You should also be aware that even if everything is perfect with your file and your sales contract is at fair market value you may still be denied (although this is unlikely).
  2. Your bank may not waive deficiency rights.  Even if the bank approves the sale and allows the lien release THEY MAY NOT WAIVE THEIR DEFICIENCY RIGHTS.   Many banks are reserving the right to later demand payment for the difference between the net proceeds on the short sale and the amount that you owed them.
  3. Many times the bank, servicer, or insurance company involved will ask you to sign a note for the balance or some portion of the balance owed on the loan if they allow the short sale closing to take place.
  4. You need to expect to receive a 1099 tax form at the beginning of the following year for the "amount forgiven."  If you are prepared in advance this will not scare you to death when you get this form saying that the amount "forgiven" was income to you.  Click here for a handy page on the IRS website that helps with this topic.
  5. Your agent really DOES matter.  Successfully closing a Jacksonville short sale requires a knowledgeable agent who is a trained short sale specialist.  It is possible that your short sale could close even without someone who knows the system, we've seen it happen, but your odds go down dramatically.
  6. A short sale WILL hurt your credit.  However, history shows that it hurts your credit far less than a foreclosure and is easier to recover from.  Fannie Mae current underwriting guidelines allow the seller to purchase two years after a short sale.  Guidelines surrounding a foreclosure now dictate a 5-7 year waiting period up from the previous 4 years (which makes no sense to me!!!).  Here is where you can find this information directly on the Fannie Mae website.

These are some of the most common issues that we think many sellers may not understand about Jacksonville short sales.  There are pitfalls and risks involved in short sales.  We believe that a Jacksonville short sale should only be considered as a next-to-last last resort with the last resort being foreclosure.   We encourage homeowners to try to get a modification first, if at all possible, since it is far better to be able to stay in your home rather than sell it if you can make that work.