The current U.S. housing market and financial crisis have caused tremendous stress and heartache for families across America. If you or someone you know is among the millions today affected by the prospect of foreclosure, understand that you are not alone
Unfortunately, too many homeowners facing foreclosure proceed without the assistance or advice of real estate professionals. Now more than ever, you need to find an advocate for you and your family's interests, one who is prepared to handle your specific needs.
Real estate professionals with the Certified Distressed Property Expert (CDPE) Designation have trained extensively to understand the options, solutions, and effective methods for dealing with homeowners facing hardships. Don't risk your financial future and the potential sale of your home with an agent who does not have all the solutions.
As a CDPE, I fully understand that saving a home can save a life, which can save a family, which can save a future.
For more information, Contact me today to discuss your options.
What is a Short Sale?
A short sale can be an excellent solution for homeowners who need to sell, and who owe more on their homes than they are worth. In the past, it was rare for a bank or lender to accept a short sale. Today, however, due to overwhelming market changes, banks and lenders have become much more negotiable when it comes to these transactions. Recent changes in corporate policy have also improved the chances of getting a short sale approved.
But to be technical, here's a more official definition:
A homeowner is 'short' when the amount owed on his/her property is higher than current market value.
A short sale occurs when a negotiation is entered into with the homeowner's mortgage company (or companies) to accept less than the full balance of the loan at closing. A buyer closes on the property, and the property is then 'sold short' of the total value of the mortgage.
For homeowners to qualify for a short sale, they must fall into all of the following circumstances:
Financial Hardship – There is a situation causing you to have trouble affording your mortgage.
Monthly Income Shortfall – In other words: "You have more month than money." A lender will want to see that you cannot afford, or soon will not be able to afford your mortgage.
Insolvency – The lender will want to see that you do not have significant liquid assets that would allow you to pay down your mortgage.
This seems simple enough, but it is a complicated process that takes the expertise of an experienced CDPE professional.
What is the Short sale Process?
To obtain a short sale in California, you must use a licensed real estate broker. This must be a broker who has experience and knowledge in short sale negotiations. Be sure you select a local area “Certified Distressed Property Expert” (CDPE). These agents are trained to handle the ins and outs of the tricky short sale. I have this certification and will do this for you at no-cost. The lender pays the listing commissions when we sell your property, and while the short sale process is occurring you are allowed to stay in your home.
Step 1: Determine if a Short Sale is Right For You.
Call me today at 661-644-2945 to determine if a short sale is your best option.
Step 2: Obtain Required Documentation
Most lenders require specific documentation, and they don’t all require the same thing. Normally the first required document is a hardship letter, which is sent to the lender and explains why a borrower can no longer afford their monthly mortgage payments. The documents are gathered and sent as a package to the lender.
Step 3: Market the Property
The home is marketed to potential buyers through various channels. You are allowed to live in the home while it is being offered.
Step 4: Negotiation of the Short Sale
Once there is an offer on your property, I submit the offer and paperwork to the lender and negotiate the deal. Negotiations can be tedious and take time. It’s best practice to continue to market your home and get backup offers because if your first offer wasn’t high enough, the lender will counter and tell you they need a higher offer. An ideal offer is one that is close to the appraised value of the house.
Step 5: Finish the Transaction
If the offer is in the neighborhood of the appraised value, most likely the lender will green light the deal. The next and final step is to begin escrow and close the transaction.
How Much Will It Cost?
Unlike some companies, there are NO charges to the homeowner. The lender pays all Realtor fees through commissions. I do not earn anything unless we successfully complete your short sale.
What is the difference between short selling and foreclosing?
A foreclosure will negatively affect on your credit score significantly. Not only will this drastically drop the score, but will prevent the person from obtaining any type of financing for 7-10 years. Even after this period, the mortgage loan application will always state that the borrower had a foreclosure in the past, and can seriously affect that person’s ability to obtain financing and credit in the future.
A short sale will affect the credit, but not nearly as much as a foreclosure. The credit will be negatively affected for approximately 24 months,. By Fannie Mae Guidelines, one should be able to purchase another home after 24 months of having done a short sale.
With a foreclosure, a public notice is filed and privacy is not maintained. Our short sale process ensures that the seller will maintain their privacy. We do not require any signs on the property.
With a foreclosure, a lender can assign a judgment against the homeowner and garnish remaining assets such as bank accounts, income, etc. With a short sale, we pressure the lender to let you walk away free and clear without any deficiency judgment actions taken.
Are there any tax consequences? December 4, 2013
IRS and California Franchise Tax Board declare California distressed home sellers not liable for federal or state income tax on short sales
LOS ANGELES (Dec. 4) – The CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) announced today it received a letter from the California Franchise Tax Board (FTB), obtained by Board of Equalization (BOE) member George Runner, clarifying that California families who have lost their home in a short sale are not subject to state income tax liability on debt forgiveness “phantom income” they never received in a short sale.
Last month, in a letter to California Sen. Barbara Boxer, the Internal Revenue Service (IRS) recognized that the debt written off in a short sale does not constitute recourse debt under California law, and thus does not create so-called “cancellation of debt” income to the underwater home seller for federal income tax purposes. Following the IRS’s clarification, C.A.R. sought a similar ruling by the California FTB. Now with the FTB’s clarification, underwater home sellers also are assured that they are not subject to state income tax liability, rescuing tens of thousands of distressed home sellers from California tax liability for debt written off by lenders in short sales.
“We are pleased with the recent clarifications issued by the IRS and the California Franchise Tax Board, which protect distressed homeowners from debt relief income tax associated with a short sale in California,” said C.A.R. President Kevin Brown. “We would like to thank Sen. Boxer and BOE member Runner for their leadership in obtaining this guidance from the IRS and FTB. Distressed California homeowners can now avoid foreclosure or bankruptcy and can opt for a short sale instead, without incurring federal and state tax liability, even after the Mortgage Forgiveness Debt Relief Act of 2007 expires at the end of this year.”
Leading the way…® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 165,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
Can I short sale if I missed or am behind on my payments?*
Yes. You can even short sell a property if you are in default.
Can I short sale if I already received a foreclosure notice?*
Yes. In most cases, the lender will stop the foreclosure process in order to complete the short sale. This is because a short sale usually saves the lender a siginficant amount of money in comparison to a foreclosure. However, the lender must be contacted immediately to delay any further action and negotiate a short sale.
Can I short sale if I have been denied for a modification?*
Can I short sale if I am in the process for a modification?*
Have a question about a home or want to talk about selling yours? Or, if you have any other questions or comments, then feel free to e-mail or call using any of the information below. You will get a response as quickly as possible.