When a Short Sale might be the answer
We understand you have a difficult decision to make when it comes to considering a short sale. Over the years we have helped 100's of clients in a similar situation, they owed more on their home than it was worth and they couldn't afford to keep making the monthly mortgage payments. Not a fun situation to be in. We can help. We do not charge sellers any commissions, nor fees. Our services do not cost sellers a penny. In fact, we negotiate our commissions from the bank and we only get paid when the house is sold and closes escrow.
Looking to avoid Foreclosure? Click here to Schedule a free over the phone short sale consultation
As of April 2010 approximately 85% of all Short Sales must comply with the new HAFA rules published by the Obama Administration. The rules for Short Sales will CHANGE Dramatically. Please ensure you are working with one of our professional, trained and certified agents. Short Sales demand that your agent know their “stuff” because what you don’t know CAN HURT you!
What is a short sale?
A short sale is a sale of real estate in which the sale proceeds are less than the sum of what’s owed on the property's plus the selling costs. It often occurs when a borrower cannot pay the mortgage loan on their property, but the lender decides that the Short Sale will result is a smaller loss than a Foreclosure.
How does it work?
In a short sale, the lender agrees to remove their lien for less than owed due to financial hardship on the part of the borrower. The home owner/borrower sells the property for less than the outstanding balance of the loan(s), and turns over the proceeds of the sale to the Sr. lien holder. Neither side is "doing the other a favor;" a short sale is often the best solution to a problem since the bank typically incurs a smaller financial loss in a short sale compared to foreclosure. Borrowers may be able to mitigate damage to their credit and if a non-recourse loan, will usually not be subject to a deficiency judgment. You will need to consult with an attorney to ensure this applies to you.
Lenders usually have a loss mitigation department that evaluates short sale proposals. Most have preset criteria for approving such transactions that vary by lender, whether they are the Sr. or Jr. Lien and changes in federal and state law or regulations.
Lenders may approve short sale proposals even if a Notice of Default has not been recorded. Given the overwhelming number of losses that mortgage lenders have suffered during the recent foreclosure crisis, they are currently more receptive to short sale proposals. This presents an opportunity for home owners that owe more on their property than it is worth to avoid the stigma of foreclosure.
McMahon Phillips Real Estate will determine your home’s likely selling price. If you owe more than the sale proceeds will generate it will be marketed as a Short Sale. You will provide detailed financial information to support your hardship and document your inability to continue making your payments. McMahon Phillips will market your home for sale to the fullest extent possible and negotiate with the bank on your behalf to obtain an Approved Short Sale.
What are the advantages?
The short sale avoids the stigma of foreclosure or bankruptcy; the seller may qualify to purchase another home within 2-3 years if otherwise qualified. Foreclosure and Bankruptcy will usually result in a longer wait before the seller may buy another home.
How does a Short Sale affect the owner’s credit?
Late payments leading up to a Short Sale will negatively impact your credit score. However, if your bank approves a Short Sale, but does not negatively report the account as with a "settled for less than owed" and you are not delinquent on your payments; the short sale itself may not have much, if any impact on your credit score.
What are the drawbacks?
Any debt relief may be treated by the IRS and California FTB as taxable income in the year the Short Sale is completed. You should consult with a qualified CPA or tax attorney to determine if and how much you will be affected. McMahon Phillips will provide referrals to qualified professionals.
Your agent must make every effort to get your lender to provide you with both release of lien and obligation to repay your loan. In they event the bank is not able or willing to provide both a relase of lien and remove any future obligations to pay, your agent must adeqautely disclose the position the bank has taken.
What are the most common alternatives to a Short Sale?
1. Loan Modification: this can take many forms including:
· Forbearance
· Re-amortization
· Principle reduction and recasting of the loan
· Short Refinance
2. Deed in Lieu of Foreclosure: Your lender may accept the return of the deed, but that the lender may be able to sue for a deficiency judgment and report any debt relief to the IRS and FTB. This debt relief may become taxable income to you.
3. Foreclosure: Once the home owner is 60 days late on their house payment California lenders may file a Notice of Default (NOD); the first step in the Foreclosure Process. Ninety-one (91) days after filing the NOD the lender may file the Notice of Trustee Sale (NOT); the second step that advises the home owner of the scheduled Auction date. If the home owner does not cure or redeem; the property may be auctioned by the trustee no less than 21 days after filing the NOT. If the property is not purchased at the Auction the Trustee conveys the deed to the lender and the property becomes a REO.
4. Strategic Default: Your attorney will advise you whether this option is available and suitable to your circumstances.
How to contact us for help with your questions:
You can call us at 925-272-0801 or email us at info@mcmahonphillips.com with your questions.
Difficult times go hand in hand with a Short Sale. McMahon Phillips Real Estate Agnets are experienced in dealing with the Short Sales banks on our clients behalf and go above and beyond to help our clients in a typically difficult and stressful time.
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