Short Sales & REO Properties

Is a Short Sale Right For Me?

What is a Short Sale?
A short sale happens when a borrower sells their property for less then what is owed on the mortgage, does not have the means to pay the difference, and the lender agrees to accept less than the amount owed to settle the debt. In order to be eligible for a short sale the homeowner must be able to demonstrate a financial hardship that is causing the mortgage to be unaffordable.

Is it more beneficial to Short Sale or Foreclose?
A foreclosure will impact your credit more than a short sale.  Your credit may even recover as soon as 2 years.  Whereas a foreclosure or bankruptcy will impact your credit for 7-10 years.  A short sale is a dignified way to get yourself out of your financial commitment.  It allows you to have more control of your destiny.

Can I really get money back from a Short Sale?
As a part of HAFA (Home Affordable Foreclosure Alternatives), qualified home owners can get $3,000 back from a short sale to use toward relocation expenses.

How do I Qualify For a Short Sale?

To qualify for a Short Sale, you must be in some sort of Financial Hardship.  Financial Hardship includes, but is not limited to: Job Loss, Extreme Loss of Income, Divorce, Separation, Death, Medical Expenses, Illness, etc.  A short sale is typically for those who have to sell rather than want to sell.

Who will pay my Realtor Commission and Closing Costs?

Your lender does.  They will typically pay the Buyer´s Agent commission, Seller´s Agent commission, escrow fees, transfer fees, property taxes, etc.  You don´t pay for anything.

If I am going through Foreclosure or am late on a payment, can I do a short sale?

Yes, in fact the bank will be more likely to work on your file.  It is to the banks advantage to work out a short sale, as a foreclosure typically costs them more in the long run.

What happens to the money that is forgiven by my lender?

Any shortfall on your mortgage will likely be written off as a loss by your lender.  You may receive a 1099 for the amount forgiven.  Because of the Mortgage Debt Relief Act of 2007, if it is your primary residence or if you are insolvent, you are not required to pay taxes on the debt relief.  Please consult with your accountant for your particular situation.

Will I receive a Deficiency Judgment from the bank?

This will depend upon many variables. The good news for California borrowers is all purchase-money loans on a one- to four-unit residential dwelling are exempt from deficiency judgments.

Loans taken out after the home was purchased through a refinance or second mortgage can be subject to a deficiency judgment under the following conditions:

·                        The lender forecloses under judicial proceedings (California Code Civil. Proc. § 726).

·                        Most lenders foreclose through a trustee's sale; however, which does not give the lender the right to pursue a deficiency judgment, with one exception (see second hard-money second mortgages below).

·                        A three-month time limit applies to actions for deficiency judgments under a judicial foreclosure.

·                        If the second mortgage is hard money and the lender has lost security for that loan through a foreclosure or short sale -- making the security for the promissory note worth nothing -- the beneficiary of that second mortgage can pursue a deficiency judgment (Roseleaf Corp. v. Chierighino, 59 Cal. 2d 35 (1963).

·                        SB 931, effective Jan. 1, 2011, offers deficiency protection to California short sale sellers if the loan is in first position. It does not apply to foreclosures.

Lenders may release property liens in order to facilitate short sales without releasing borrowers from their obligations to pay under the promissory notes. The secured debt can convert to an unsecured one after the sale.  We always advise speaking with a real estate attorney about your situation.

Can I stay in my house until the sale is completed?

Yes, you do not have to move out until the close of escrow.

Will the bank continue their collection activities?

Most likely.  Unfortunately in many cases the departments do not communicate.  So, the loss mitigation (short sale) department is not in touch with the collections department.  So, you may still receive the pestering collections calls.

Are there any dangers to be aware of in doing a short sale?

Be careful of scams.  The change in the real estate market has created an opportunity to take advantage of people in hardship situations.  Don´t ever sign a quit claim deed or power of attorney without consulting with an experienced agent and attorney.

Can I hire any Realtor to short sale my home?

No.  Work only with a Realtor who is a certified short sale and foreclosure specialist.  Make sure that the agent you choose has closed many short sales on the Listing side.  It takes attention to detail, persistence and experience to successfully negotiate and close a short sale.

How much work does this take and what do I need to do?

Start gathering your recent bank statements, tax return and paystubs.  Give us a call for a free consultation.  Then, meet with your real estate attorney and your accountant to decide if it is the best decision for your particular situation.

Call us for a free, confidential consultation.

Each situation is unique and we are here to help you evaluate yours.
805-331-0248 or 805-570-5680

We advise that you speak with your attorney and accountant to ensure that a short sale is the right choice for you.


REO's and Foreclosures

Our office,  Prudential California Realty, is the leading office in Santa Barbara for Bank Owned (REO) property sales.  We have the largest inventory of Bank Owned property listings as well as Pre-Market, Bank Owned property, soon to be listed on the market for sale in Santa Barbara County.  Also, we actively track Pre-Foreclosure Property and can help you determine the timing and availability of properties of Interest.