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Short Sale Services
Short sales are very complicated legal transactions and most short sale professionals are not equipped to handle the complexity. Due to varying lender requirements and individual state laws, short sales must be meticulously coordinated with multiple parties to be successful. That's why more than 75% of traditional short sales are unsuccessful even though a short sale is usually better for both the lender and borrower. You need an experienced team working on your behalf.
Whether you’re faced with foreclosure or simply overwhelmed by the magnitude of negative equity, trust Lighthouse Short Sale to provide a proven, legal means to satisfy your mortgage debt without a deficiency obligation, address tax implications, and protect your credit rating.
FAQ's
Visit our Frequently Asked Questions page to find answers to some of the most commonly asked questions. If you need more specific answers, please contact us or call us at (877) 777-2180 for more assistance.
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Evaluate Your Options
Loan Modification
Modifying the terms of your loan is advertised as an easy fix that results in lower monthly payments. While it can work for some homeowners whose financial hardship is temporary, the reality is that for most, it is very difficult to qualify for a meaningful loan modification. Before you pay someone to work on your loan, explore these issues.
- Income - You must have income to qualify. If you are unemployed or self employed, it is usually not an option.
- Fees - You will have to pay upfront to have a loan consultant or lawyer negotiate new loan terms - payment that is often the equivalent of one mortgage payment. Worse, there are no guarantees the outcome will be successful.
- No principal reduction - Unless you pay for an expensive lawyer who knows how to use legal leverage, a loan modification won't reduce the principal owed. Without a principal reduction you won't solve your problem with negative equity.
- Bank cooperation - Banks are not motivated to modify loans in any way that will benefit the borrower. They would rather get cash from a short sale.
Foreclosure (Walk Away)
Foreclosure is rarely the best option for homeowners. In a foreclosure, the homeowner stops making payments and the lender takes possession of the house. Foreclosures create additional expense and liability for the lender. Depending on the state you live in, you may still owe the debt even after a foreclosure. They may also lead to more severe tax consequences and significantly impact your credit.
- Mortgage deficiency - A deficiency is the difference between the amount owed and the amount received at the Trustee Sale. You may be liable for the deficiency if you walk away.
- Tax implications - If the deficiency is forgiven, the IRS may consider it as income and you could be liable for more tax than you would with a short sale. Check conditions explained in the IRS Publication 4681.
- Credit rating - A foreclosure has a far worse impact on your credit than a short sale. It remains on your credit record for 7 years and, according to current Fannie Mae guidelines, will affect your ability to purchase a new home for 5 to 7 years.
Deed In Lieu
Deeding your house title to the lender in exchange for their agreement not to foreclose is called a deed in lieu of foreclosure. You negotiate with the lender to accept the deed and they cancel the foreclosure action. It is not without negative consequence to your credit, but If a short sale or loan modification is not an option, a deed in lieu may be an answer. One difficulty in negotiating a deed in lieu settlement is that lenders do not want the property back because it creates liability issues for them and additional costs. If you are able to negotiate a deed in lieu, be aware of the possible negative consequences.
- Forgiveness of debt - You may be liable for the loan balance if it is not specifically waived by the lender.
- Tax implications - If the loan obligation is waived, the IRS may consider it as income and you could be liable for taxes. Check conditions explained in the IRS Publication 4681.
- Credit rating - A deed in lieu is typically more impactful on your credit than a short sale but not as bad as a foreclosure. According to current Fannie Mae guidelines, it will impact your ability to qualify for a new mortgage loan for four to seven years.
Short Sale
With a short sale, the lender agrees to accept less from a buyer than is owed on the mortgage. Many lenders are willing to do this because it gives them cash and helps them avoid the expense of foreclosure. Short sales are a complicated transaction with a low success rate. More important, they can create tax and deficiency considerations that must be managed. Make sure you manage the implications and work with a company that has a proven track record in short sales.
Possible Considerations
- Mortgage deficiency - A deficiency is the difference between the amount owed by the borrower and the amount paid to the lender by the short sale buyer. Lighthouse Short Sale gets your deficiency waived as a condition of the settlement.
- Tax implications - Short sales often create unexpected tax consequences. With Lighthouse, a tax advisor will review your transaction and identify possible negative implications and help craft a transaction structure that mitigates them.
- Credit rating - Short sales are typically less impactful to your credit than a deed in lieu of foreclosure. Lighthouse will use all available leverage to protect your credit rating to the extent possible. In the worst case, according to current Fannie Mae Guidelines, it will impact your ability to qualify for a new home for only 2 years.
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