By Suzanne Rocha- Broker: Realty World Cal Home
Many homeowners are still dealing with properties that are underwater! Simply this means that a property owner owes more to the bank/Lender than the value of the property. After years of a challenging real estate market and still in 2014, 1 out of 3 properties are still underwater. More and more homeowners have educated themselves on the Short Sale Solution. Many homeowners who have been disillusioned by the loan modification process have ended up pursuing a Short Sale to preserve their financial future and regain a life without the stress of challenging mortgage payments. A Short Sale can be a win-win situation. The Short Sale allows homeowners to get relief from the burdensome property while looking forward to becoming homeowners again with great affordable property.
The Short Sale Option Q&A
So what exactly is a “Short Sale”?
A Short Sale is the sale of a home when sales proceeds do not fully pay off the existing loan(s) and lender(s) accepts a discounted payoff to fully satisfy the loan.
The best part, the existing lender pays virtually all sales costs, including commissions, escrow and title fees. You get your home sold, the loan(s) are paid off, you avoid foreclosure and you minimize the damage to your credit.
Are Banks still conducting Short Sales?
Absolutely! Mortgage lenders are still willing to work with borrowers faced with a hardship to accept a discounted payoff on a mortgage. If you are faced with a hardship that makes it likely you will no longer be able to meet the obligation on your mortgage, your lender would prefer to settle the matter with you as opposed to taking back the property through a foreclosure. Remember, that not all hardships are financially based.
Many homeowners have qualified for relocation incentives to assist in helping them relocate. In this market we are seeing anywhere from $3,000-$5,000 in relocation incentives. In fact, many of our clients have been able to receive some of these incentives. As our client, we will look into any and all incentives that you may qualify for and approved by your Bank. Qualification is strictly approved by your Mortgage Lender and not guaranteed.
As you consider the option of a Short Sale, remember that in most instances, your bank would rather approve a Short Sale than repossess a property where they usually pay more in real estate fees and expenses to sell.
If I do a Short Sale, how much will I have to pay to sell my home?
The great news is… Nothing. It’s true, in most cases; it will cost you nothing if your lender approves the Short Sale. All commissions, title/escrow fees, and even unpaid property taxes may be paid by the lender as part of the Short Sale approval. Remember, lenders approve Short Sales and accept the resulting loss in an effort to avoid bigger losses through a foreclosure. As you can imagine, it takes superior skill and expertise to work with banks to approve a Short Sale. The high volume of short sales that we have been able to get approved over the years certainly makes us experts! One of the advantages of this solution is that our services are paid by your Bank in the approved short pay off, not you!
Can I simply deed my property to someone else and avoid the hassle?
Deeding your property to someone without paying off the loan yourself is almost always a bad idea. In the first place, many lenders still consider you primarily responsible for the payment and loan balance. If loan payments do not get paid, or if the lender ultimately forecloses, this will show negatively on your credit report.
Secondly, when you deed your property to someone else, you give up control of the property. Along with the deed goes the ability to control the property and consequences you may be faced with. Do not deed your property to someone else without paying off the loan, unless you have consulted with an attorney.
How do I get started on a Short Sale?
It’s very easy. First and foremost, as California Market Specialist we review all your options with you. Again, at no charge to you, we are able to identify your circumstances and hardship which will pre-qualify you for the Short Sale process. Ultimately, it is your Lending Institution which grants the final approval. The best way to get you started is through an initial telephone conversation to review your situation. Again, its simple and at no cost to you.
What kind of hardship would the bank consider in order to approve a Short Sale?
It’s important to remember that each homeowner’s situation is different. Don’t try to determine if your eligibility for a Short Sale without speaking to us first. Our team of experts can review your situation to determine if you are a candidate.
Examples of hardships include, but not limited to the following:
- Loss of Income including: underemployment, unemployment or decreased business income
- Unexpected increase of expenses and debt
- Significant illness, injury or death
- Illness or injury in the extended family – particularly if it forces relocation and increase of expenses
- Job relocation
- Divorce or split of domestic partners
- Adjustment in mortgage payment and/or unforeseen increase in living expenses
- Inability to maintain renters
I am current on my mortgage; will my lender consider a Short Sale?
The answer is, maybe. Some lenders will accept and review a Short Sale request for approval on loans that are not delinquent dependent on the homeowner’s circumstances. Many lenders have declined Short Sales based on a lack of valid financial hardship with homeowners who remain current. This is something that should be reviewed and discussed in the initial stages of the Short Sale process. Again, each situation is different.
Do lenders Approve all Short Sales?
In a word…no. It is critical to work with experts like ourselves who have the demonstrated experience in getting Short Sales approved. Unfortunately, the less experience professionals can make costly mistakes in processing your Short Sale with your lender. Expertise is key in this area!
Are laws in place to help homeowners who conduct a Short Sale?
Yes there are! Californians have been able to take advantage of several laws that have been critical to their short sale solution. First, there are two laws in place that affect the Mortgage Lender’s ability to claim money later after the short sale has been approved. In a nutshell, if your Mortgage Lender approves a short sale and the sale closes, they cannot go after the homeowner with a deficiency judgment later. These anti-deficiency laws pertain to 1st and 2nd Mortgages and regardless if they were purchase money loans or refinanced loans.
In 2014, the IRS and the Franchise Tax Board are still assisting homeowners who conduct short sales of their primary residences with tax forgiveness. Currently, the Tax Forgiveness for Primary Homeowners who conduct a Short Sale are based upon California being an a non-recourse state in recent news. Senator Barbara Boxer worker hard for Californians to get the IRS to issue this ruling. This is extremely important for those homeowners needing to conduct a short sale this year. This will assist so many homeowners with any potential tax consequences arising out of the 1099 C (Cancellation of Debt) that is issued by their Mortgage Lender after the successful completion of their short sale. As far as taxes are concerned, consultation with a qualified CPA or Tax Accountant is always advised especially when a rental property is to be short sold. It is also advised to consult with a professional who has experience with homeowners who have conducted short sales and who are also up to date on current laws. Everyone has their own unique financial situation and seeking a professional’s tax advise is highly recommended.
Getting a Short Sale Approved
Working with lenders to get Short Sales approved is what we do every day. We know the importance of getting started on the right foot with the lender’s Short Sale department. Being able to communicate on the Short Sale level is critical. Working day in and day out with the Bank’s Negotiators to get thousands of Short Sales approved is what we do best!
Who can Win in a Short Sale?
It’s never easy to feel the stress of dealing with a property that you can no longer afford or maintain. Homeowners often describe it as being embarrassed, ashamed or emotionally depleting. It’s important to remember that it is only embarrassing if you don’t do something about your property…if you continue to allow your Mortgage payment to control your life. No one person can be blamed for the fall of the economy and Real Estate market. Homeowners can only feel relief by taking the control back and doing the right thing by not just walking away. Yes a Short Sale can we a win win situation.
It is NOT often in real estate transactions that virtually all parties with a financial interest can be winners in the same transaction. A successful Short Sale is one of those rare situations where everyone can win.
- The Buyer Wins by acquiring a property at a great market price. While some Short Sales will be bigger bargains than others, nearly all Short Sales will represent a good deal for the buyer.
- The Seller Wins by avoiding foreclosure and all the credit damage that goes along with it. The property gets sold, all the loans get paid off and the existing lender pays all the sales costs. Most homeowners feel like a big ball of stress has been lifted from their shoulders. Homeowners can regain financial freedom and recover in a short amount of time.
- The Mortgage Holder Wins by reducing the loss they absorb to get the delinquent loan off their books. Mortgage companies know about the accelerated costs associated with acquiring a property through foreclosure. To resell the property the mortgage company frequently needs to invest money for clean-up/repairs, staff to manage and maintain the property as well.
The Foreclosure Option…No!
At any rate, a foreclosure should be avoided. Again, this is quite damaging to your credit, to the surrounding homes in your community, and to the economy. As California Market Specialists, we do all we can to help you avoid a foreclosure. Many people have learned the hard way that just “walking away” isn’t the best decision. Remember, we are a phone call away to help you review all your options.
Who You Use is an Extremely Important Part of a Successful Outcome
The biggest mistake homeowners make is not making the best decision on who to use to conduct your Short Sale. Getting a Short Sale approved is complicated and requires skills, knowledge and expertise. We have been able to get thousands of Short Sales approved over the years. It’s not a transaction we do part time or here and there, but offer a full time staff dedicated to the approval process. As Short Sale Specialists, we pride ourselves in the staff we call the Cal Home Team. Many members of our Short Sale Team have actually worked for major banks and can offer key insight. In addition, our Team has been through intense training and certification programs. The large volume of Short Sales that we get “bank approved” speaks for itself. This type of experience is invaluable to our clients. We have been able to accomplish Short Sales for homeowners of condos to multi-million dollar estates as well as with primary and secondary properties. No matter what your situation is, you need an expert on your side. The Cal Home Team is the right team of experts!