Home
HomeWork With MeBuyers / SellersCommunitiesFinancingResources
 
Featured PropertiesNew Home SearchWhat's My Home WorthBuying TipsSelling TipsShort SalesContact Me



SHORT SALES




With today's economy and housing market crisis, 1 in 8 homeowners are behind on their mortgage payments and in a home that is worth less today then what they owe the bank.  Are you unsure of what to do and tired of hearing all of the different information about short sales or walking away from your home?  Call me today and let me help you navigate through the short sale process so you can determine what is the "RIGHT" choice for you and your family to rebuild your financail situation.

What is a Short Sale? 

             A Short Sale is an opportunity to sell your current home, which has a higher balance due on the mortgage than the current market value you will be able to sell your home for.

Common Questions Regarding Short Sales & Loan Modifications

This guide has been designed to serve as a resource for real estate agents and Homeowners. It emphasizes clarification of questions frequently asked by Homeowners regarding loan modifications, short sales, foreclosures, and those who wish to apply for a loan after having sold a property through a short sale.

Q: Is a short sale the same as a foreclosure?

A: No, absolutely not.  A foreclosure is a property that has been foreclosed upon by the bank.  In other words, the owner has not been able to meet their loan commitment and has surrendered the property to the lender in lieu of continuing to make thier payment on their current loan.  They have “lost” their home or had it taken from them.  A short sale signifies that a homeowner has worked with their lender to find an amicable solution to their challenges.  They have established an agreement with the bank to sell their property for less than what is owed on the loan(s) associated with the property.  In some instances, homeowners arrive at this type of arrangement with their lender without falling behind on their mortgage payment or violating the terms of their loan.

Q: I have been trying to do a loan modification, but find it difficult to talk to the bank. What can I do? Should I hire an outside company to perform my loan modification?

A: The simple answer is the banks are swamped with requests to modify thousands of homeowner loans and a modification takes time.  While there are some reputable companies performing loan modifications, I recommend you work directly with the bank.  This will take time and it is frustrating.  Download Loan Modification paper work from your lender's website and it will guide you with the paper work that will be most likely needed to process your modificatio request.

Q: I have heard about some cases that the loan should never have been approved in the first place. What do you recommend?

A: If you feel you were approved for a loan that has inconsistencies or perhaps invalid information, we suggest you contact an attorney specializing in Forensic Audits.  Be aware that this is very hard to prove and in most cases the lender used the information you provided.  Like loan modification services, I do not recommend that you pay any money in advance to review complete your Forsenic Audit!

Q: Is a Short Sale right for me?

A: Here are a couple of important sign that can help you determine if doing a short sale is right for you:

  • You are behind on your mortgage payment and are unable to keep up with all of your monthly obligations. Some of the reason for falling behind on your mortgage payment may include sudden change in monthly household income, health, loss of job, divorce and more.

  • You are NOT behind on your monthly mortgage payment but know that you will soon be unable to keep up with all of your monthly obligations and therefore in the near future will not be able to afford to keep your home.

  • You are NOT behind on your monthly mortgage payment but need or want to move. Reasons could include a job transfer, a health reason, retirement, and more.

  • You are NOT behind on your monthly mortgage payment and have come to the decision that staying in your home is not a good “business decision” or financial decision.”

If you match any of these scenarios then doing a short sale could be the perfect solution!

Q: I have a second mortgage on my property. If I sell through a short sale, what will happen to this loan?

A: Typically, the holder of the second lien will settle for some form of payment.  The payment may come either from the mortgage lender that holds the primary lien against the property, from the seller, or from the buyer. The parameters of every short sale tend to be unique. It is critical that a seller work with a REALTOR® experienced in the short sale's who is well equipped to help the seller navigate through this process.  

Q: Does a short sale constitute a taxable event?

A: Possibly, but there is a federal law, the Mortgage Debt Relief Act that potentially clears many from federal tax responsibility. There are two main qualifications for the debt relief act, one is it must be a non-recourse loan, often called a purchase money loan, in other words it can not be a loan that was refinanced. The second is it must be on your primary residence (income properties do not qualify). It is important to note that the Debt Relief Act expires at the end of 2012. It is best to check with a knowledgeable tax advisor or CPA that is well versed in short sale tax law in reference to this question. In addition to the Debt Forgiveness Act, you may qualify as being “insolvent”. These individuals secured an “insolvent tax payer” designation which disqualified the short sale as a taxable event on their tax return. Again, it is important you check your specific situation with a qualified tax professional. I will be happy to refer you to our preferred vendors if you do not have one. I highly recommend Malkasian Accountancy in Sacramento, CA. I have found Jeff and Gary to be very knowledgeable in these matters.

Q: Do you work with all banks?

A: YES, I currently working with all banks. Unlike some agents and negotiators, I do not selectively choose which banks we work with and which banks I won’t.  I have the worked with over 50 different banks, lenders and servicers across the United States.

Q: How long does a Short Sale take?

A: That depends on a number of factors, but most of my short sale listings get offers within 30-60 days and close in 4-7 months.

Q: How will a Short Sale impact my credit?

A: This question is asked very frequently and has many difference variables involved.  The first thing to keep in mind is that the moment you go 30+ days behind on your mortgage payments, your bank has he right to report to all of the credit bureaus that you are 30 days behind on your payment.  After going through a Short Sale or a Foreclosure, most people have multiple 30, 60 and 90 day late payments reported on their credit report.  Once the actual Short Sale is completed, most banks will report to your credit report that your account was “paid in full for less than the full amount”. Your credit report may also be marked as “settled.” It is important to keep in mind that each lender has a different way of reporting a Short Sale, but this is the most common language seen.  If your home were to go to foreclosure you would likely see the bank report “Foreclosure” on your credit report.  It is difficult to gauge how much your credit scoring will be affect from a Short Sale vs. a Foreclosure. Credit experts will agree that neither a Short Sale nor a Foreclosure is  favorable to your credit or credit score, however, the impact of a Foreclosure is much worse then a short sale. I strongly advise you work with a Credit Counseling expert for more specifics on this topic. I have several that I can recommend in our area. They will work with you to improve your credit after the Short Sale is completed. Recently, many of my clients were able to Short Sale their homes without ever missing a payment, therefore, they do not have any late payments reported to their credit. With no late payments on your mortgage, your credit score is generally not as affected. It is possible to maintain a higher credit score by completing a Short Sale without missing payments on your mortgage and other bills. Please be aware though, your lender will still report a Short Sale was completed which may drop your credit score.

Q: Can the bank sue me or place a judgment against me for the difference between what I owe and what the home sells for?

A: This is a great question that I recommend you contact a qualified Real Estate Attorney. What you should know is that California is refered to as a “Non Judgment Deficiency” state. This means generally speaking, if the bank forecloses on your home, they cannot pursue you for a deficiency judgment.  In the state of California, we also have Senate Bill 931 (SB 931) pertaining to California Short Sale Deficiencies which was signed by the Governor on September 30th .  Beginning January 1st, 2011 any first Mortgages that accept a short sale will not be able to obtain a deficiency judgment against a seller after the completion of short sale. If a lender provides written consent to a short sale on a first mortgage, the lender must accept the sales proceeds as full payment and discharge the remaining balance due on the loan. The new law will apply to all first mortgage loans secured on one to four residential units, including purchase money, hard money and refinanced loans. The new law does not prevent the lender from seeking damages for fraud by the borrower.

Q: Can I obtain a new mortgage after I have completed a short sale of my property? If so, how long do I have to wait before applying?

A: This is a very common question and one that is very difficult to answer since situations varies from one to the other. This depends on the number of mortgage payments missed, what a seller’s credit score is after the completion of the short sale, the overall situation with other debt, and the personal situation causing the short sale. Lending situations are constantly changing, but as a general rule of thumb, currently most FHA and conventional loans will take about 3 years after the short sale. Currently VA loans are 2 years. While these guidelines are constantly changing, it is wise to consultant a Mortgage Lender to discuss your specific situation in detail to determain when you can secure a new home loan.

Q: I have been considering short-selling my current home because I am in tough position. Whom do you recommend that I talk to about this?

A: Please call me today. I have been specializing in tshort sales for over the last three years.  I offer a NO FEE, NO OBLIGATION consultation so I can discuss your situation in private. The important thing is that you take control of your situation and get on track so that you will be able to buy a home again in the future in the quickest amount of time possible. I can help you achieve this outcome by constructing and implementing a plan in which you will be fully empowered by understanding or your options. Besides discussing your best course of actions with your home, I will recommend professionals to help you get on track.

Q: Who pays for the commission and fees on a Short Sale?

A: One of the beautiful things about a short sale is your lender pays for most of the standard fees associated with a home sale. These typically include; commissions, closing costs and in many cases, back taxes and various liens. There are few things that the lender typically will not pay including any home owners association fees so it is important to keep these current. In some cases when a junior lien holder is involved, they may ask for a contribution from the seller. This is a case by case scenario. I will discuss this further when I review your personal information.

Q: I received a loan modification from my lender, but how do I know if it is a good solution for me?

A: Each case is different, but the simple truth is many times it is not that great of a deal. The main reason is in most cases there is no significant principal reduction to your loan. For example: If you purchased a home for $600,000 and for this discussion owe close to this amount.  So this is the amount the loan modification will be financed for, but that house might be worth half that amount. You would be financing a sum that may not come back to current values for many years. One of our services that I provide is an incredible financial tool that will analyze your specific situation.  I call this the Right Path Analysis. Contact me and I will be happy to discuss your specific situation and work with you to provide a full customized report for your specific situation.

Q: I would like to keep my home, and have received an offer from my lender with a loan modification that does not look very appealing. Can I perform a short sale on my home and have a family member repurchase it at current values allowing me to remain in the home.

A: NO. If you decide to short sale your home, most lenders will require you sign what’s generally referred to as an arms length agreement. This prohibits you performing a short sale directly to any family member or other person you may know or have a relationship with.

Question: Why won’t they lower my debt to new home values?

A: Keep in mind that many of these loans are financed by private money investors and they have no incentive to lower your debt. The government has introduced a refinance program that some may qualify for, but there are definite qualifications to this program. Just a few of the parameters are: You can not be late in your payments. The first loan must not be more than 125% upside down. This means if you owe $300,000 on your first loan, your home must have a value of at least $375,000. You loan must be funded by Fannie Mae or Freddie Mac. These are just a few of the qualifications. For full qualifications and to see if your loan is funded by either of these two, log onto http://makinghomeaffordable.gov

Please contact me if you have a specific question or would like to discuss your personal situation.  I welcome the opportunity to meet with you to discuss your situation and how I can help you move forward.  Working with an expert is crucial for your short sale be a success.

CALL ME TODAY FOR YOUR FREE CONSULTATION!

 Note: Short Sale Advisors does not encourage short sales in all instances. This FAQ guide has been written to help borrowers find answers to questions common to many individuals who are considering a short sale. We strive to circulate accurate information so that consumers can make responsible decisions. We encourage you to always seek professional legal and tax advice when considering a short sale and always stay current in your mortgage payments if possible. While we have made every effort to give accurate information, Time lines and current federal and state laws can change rapidly. Please contact federal and state web sites for the most up to date information.

 

 

 

 




Kimberlie Hicks, Negotiating Your Home Dreams, Keller Williams Realty. Roseville Real Estate, Natomas Real Estate, Sacramento Real Estate, Elkgrove Real Estate, El Dorado Hills Real Estate.
Kimberlie Hicks
Telephone
(916) 480-8176
Kimberlie Hicks, Negotiating Your Home Dreams, Keller Williams Realty. Roseville Real Estate, Natomas Real Estate, Sacramento Real Estate, Elkgrove Real Estate, El Dorado Hills Real Estate.
CalBRE #01295034
  Design by Style Agent