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What is a short sale?

A Real Estate short sale occurs when the homeowner sells the house for less money than is owed on the mortgage.

In order to conduct a short sale, the seller needs the permission of their lender.

The shortfall between the sale price and the value of the mortgage is often forgiven by the lender.

In few cases, your mortgage company may request a contribution to the sale in the form of cash at close of sale or a Promissory Note that will be for a small portion of the amount owed…however California Laws protect most homeowners!

Example: You owe $50,000.00 on a 2nd lien or Home Equity Line of Credit (HELOC). The bank holding this mortgage or “note” may request that the seller pay 5 or 10 cents on the dollar or in this case $2,500 to $10,000 to get rid of $50,000.00 in debt…Now Thats A Deal!

In California, this has changed! For most homeowners of Primary and vacation homes…banks are not allowed to ask for any money! Call us to find out why? 909-292-8259

Setting expectations:

Q: Will a Short Sale Stop a pending Foreclosure?

A: In some cases yes…each scenario is unique…best to consult an experienced agent to get the answer.

Q: How will my credit be affected by a short sale?

A: Our experience is a hit of between 50 to 150 points. Just as your credit score is unique to you…the impact will be just as unique.

Q: How long does a short sale take?

A: A “short sale” is to the contrary, not short in length of time. Most short sales take on average 90 to 150 days to complete after the short sale package and an accepted offer has been submitted to the mortgage company, bank or servicer.

Q: Can I live in the home during the short sale?

A: Yes.

Q: Will my Federal (IRS) and State taxes be impacted by a short sale?

A: In most cases not on the Federal (IRS) level as you will be protected by “The Mortgage Debt Forgiveness Act of 2007“. When it comes to state taxes, this is unique to your state laws. In California, SB 401 allows California residents like forgiveness.

Q: Can I participate in the Governments Home Affordable Foreclosure Alternatives (HAFA) program?

A: Under the current qualifications to the HAFA program, no one can guarantee participation or acceptance into the HAFA program as the decision is up to your mortgage company and its investor’s as to your approval for participation.

Q: How do Real Estate Agents commissions get paid?

A: The mortgage company and real estate agent will negotiate this amount and it will be paid by the mortgage company.

Q: I’m behind on my property taxes, do I have to pay them current?

A: No. The mortgage company, bank or servicer will pay the taxes current prior to close of sale.

Q: I am late or past due on my Home Owners Associations or HOA dues?

A: The HOA has equal power to foreclose or hold up a short sale from being successfully completed. Unfortunately, mortgage companies will not, in most cases pay any past due mortgage payments or fines. We always request that the homeowners continue to pay the HOA dues through the entire short sale process and if they are late, get current!

SECRET: You can usually negotiate with the HOA to reduce these past dues or any associated fines by simply asking.

These are some of the questions we get asked…if you are interested in learning about short sales and how a short sale may benefit you please call us at 909-292-8259

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