Short Sales Information
Hot Off the Press:
Effective Jan 1st 2013.
(Posted from CAR article: California Association Of Realtors.)
“Mortgage Debt Forgiveness extended
Late last night, Congress reached a settlement in the “fiscal cliff” negotiations. As a result, the Mortgage Forgiveness Debt Relief Act has been extended for another year. The measure will continue to exempt from taxation mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale, loan modification (including any principal reduction) or foreclosure.
C.A.R. would like to thank the 26,296 California REALTORS® who sent messages to their members of Congress and made 1,862 calls in response to C.A.R.’s Call-for-Action.
Also under the agreement, so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers. These limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000. The thresholds have been increased and are indexed for inflation so will rise over time. Under the formula, filers gradually lose the value of their total itemized deductions up to a total of a 20% reduction. The reinstitution of these limits has far less impact on the mortgage interest deduction (MID) than a hard dollar deduction cap, percentage deduction cap, or reduction of the amount of MID that can be claimed.
Capital gains rates on the sale of principal residences will remain unchanged and continues to exclude the first $250,000 for single taxpayers and $500,000 for married couples. ”
Short Sales and Foreclosures:
Q. What is a Short Sale? A Short Sale is the sale of a home when sales proceeds are not sufficient to pay off the existing loan(s) but the lender(s) accepts a discounted payoff to fully satisfy the loan. A lender would usually rather negotiate a settlement today with a Short Sale than be forced to incur the expense of a foreclosure later. Consider this: the lender wants to limit their losses in the future just as badly as you do. At the same time, the existing lender pays for all sales fees. This includes sales costs, commissions, escrow, title and any repair costs. The loan shows as “paid” with a zero balance on your credit and you avoid foreclosure.
“Don’t worry you are not alone!”
You must remember, we’ve all had our ups and downs in life and a lot of other good people are also in the same tough spot as you. Life seems scary when you’re facing the reality of foreclosure and we know how you feel when you just don’t want answer the phone any more. Here in Orange County, many home owners have found themselves in a position where they are having trouble keeping up with their payments and the mortgage on their home is greater than the value of their home. Unfortunately, many homeowners give up because they think there is nothing they can do to stop the Foreclosure of the home. But there is something that can be done, a Short Sale.
Q. Why would a lender accept a Short Sale over foreclosure? A. With an uncertain housing market in Orange County, it is often in the financial interests of a lender to accept a negotiated settlement rather than incur the costs of a prolonged foreclosure process. And if a lender does repossess a property, they could continue to incur costs for months in order to maintain the property while they try and sell it. A short sale is a practical and cost saving alternative for all parties involved.
Q. Is a Short Sale right for me? A. If you add up your total monthly expenses, including your mortgage, property tax payments, insurance, car payments, utilities and food and compare that to your take-home income, how much longer can you afford to keep up with your payments? If you have an adjustable rate, and the payment is going up, how long can you afford that? Is it worth prolonging your current financial situation? Especially if home values in your area continue to decline.
If you are faced with economic hardship, a Short Sale can be a financial life-saver. You may need to ask yourself, is it worth it to continue to fall deeper into debt, falling further and further behind with little hope of catching up?
Q. What is a financial hardship? A. A hardship is a situation that has a life changing effect for the borrower that results in an in-ability to pay the mortgage debt in either, short or long term. Some examples are:
- Separation or Divorce
- Medical Bills
- Inability to work due to health reasons
- Death of Spouse
- Job Relocation
- Reduced Income or Unemployment
- Business Failure
- Adjustment in mortgage payment or unforeseen increase in living expenses
- There are additional hardship examples, for details please contact us
Q. How much would it cost me to sell my home in a Short Sale? A. Nothing! All fees and commissions are assumed by your lender-NOT YOU. Your contract will specifically read: “Seller’s agreement to sell is subject to approval by existing lender of a Short Sale at no cost to Seller. Seller shall not be required to deposit funds to close escrow.”
Q. If I have two loans, can I still do a Short Sale? A. Yes. As your short sale realtor, we will work with both lenders to negotiate a Short Sale transaction. Even if the value of your home is less than the value of the first loan, our experienced staff can normally get both lenders to cooperate.
Q. What about my credit? Won’t a Short Sale ruin my credit? A. A short sale usually does not reflect poorly on a credit report. And it cannot begin to compare to the damage your credit will incur if you are ultimately forced into foreclosure. With a foreclosure, you can expect to be unable to obtain a mortgage for at least 7 years. With a short sale, you can expect to resume normal borrowing (for mortgages, car loans and credit cards) within a very short period of time. Remember, with a Short Sale, you walk away with your mortgage debt zeroed out. With a foreclosure, the collection stays on your credit indefinitely!
Q. My property needs a lot of repair work. Can I still do a Short Sale? A. Yes. A lender is often less likely to want to repossess (foreclose on) an Orange County home that needs work-it would make it harder for them to sell it later. Lenders are not in the “home repair” business. They do not want the responsibility. A home in rough shape may serve as an incentive for a lender to do a Short Sale.
Q. Do I have to deal with the bank throughout the Short Sale process? A. As your short sale agent, we take on the task of communicating and negotiating with your lender relieving you of that stress and burden.
Q. Will my short sale negatively affect my neighborhood home values? A. A successful Short Sale will result in a higher sales price and net proceeds available for your lender thereby supporting higher neighborhood values.
Q. Can I simply deed my property to someone else and avoid foreclosure that way? A. No. Be wary! If you fall behind on your mortgage payments you will quickly find yourself drowning in mail and phone calls from different people promising to “save” you. But deeding your property to someone else without first paying off the loan(s) is almost always a bad idea. Even if you deed the property to someone else you are still responsible for the loan payments. If the loan payments are not made, it is your credit that is affected (regardless of who holds the deed). In other words, you lose control of the property and can still be foreclosed on. What ever you decide, do NOT deed your property to someone without first paying off the loan unless you have consulted with your OWN personal attorney.
Q. What is mortgage deficiency? A. A mortgage deficiency is the difference between the loan amount owed by the borrower and the purchase price of the short sale paid to the lender. In some states and some instances homeowners are protected and lenders can’t pursue them for the deficiency. However, in some cases a short sale can leave you owing a substantial debt, which can be collected by garnishing your wages or other aggressive collection actions. As your Orange County short sale agent, we will work hard to get your deficiency waved, if applicable, as a condition of the short sale. We highly recommend talking to an attorney to discuss mortgage deficiency and how it may or may not apply to your situation.
Q. What are the tax consideration of a short sale? A. On December 20, 2007 President Bush Signed H.R. 3648, The Mortgage Forgiveness Debt Relief Act of 2007. The law applies to primary residences only and takes effect from January 1, 2007 through December 31, 2012. It provides relief to home owners by shielding them from the additional burden of potential federal income tax on any amount written off or forgiven by their lender in case of foreclosure or short sale. Remember, this act applies towards federal income taxes, state income taxes may apply. Consultation with an experienced tax professional to see how the law applies in your circumstance is strongly advisable.
Q. Can any agent do an Orange County short sale?
A. Not all agents can do a short sale and not all people qualify for our help. We are here for you if your situation meets the following criteria:
- You have a valid hardship
- You have little or no equity in your home
- Your are unable (or soon will be unable) to pay your bills on time
- You want to work with a Certified Distressed Property Expert (CDPE)
Q. How can I get started on an Orange County Short Sale? A. Very easily. To be pre-qualified, just give us a call today or fill out the form below and we will review your situation and options. There is no charge and no obligation for this private consultation. 714-470-8600 or MikePatel@sbcglobal.net or
Benefits Of Our Short Sale Program:
FREE – Absolutely No Fees or Cost To You
Cash Back From Bank For Cooperation
Lease Back Program
Free Rental Placement Service
Mortgage Debt Relief
Back Taxes Can Be Eliminated
We Do All The Work & Negotiate With The Bank(s)
Stay In Your Home Longer
Choose A Move Out Date
Discreet – No For Sale Sign
(We recommend that you also consult with an Attorney or a CPA regarding your situation, results may vary.))
What is a Foreclosure?
Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice, called a Notice of Default or Lis Pendens. The foreclosure process can end one of four ways:
- The borrower/owner reinstates the loan by paying off the default amount during a grace period determined by state law. This grace period is also known as pre-foreclosure.
- The borrower/owner sells the property to a third party during the pre-foreclosure period. The sale allows the borrower/owner to pay off the loan and avoid having a foreclosure on his or her credit history.
- A third party buys the property at a public auction at the end of the pre-foreclosure period.
- The lender takes ownership of the property, usually with the intent to re-sell it on the open market. The lender can take ownership either through an agreement with the borrower/owner during pre-foreclosure, via a short sale foreclosure or by buying back the property at the public auction. Properties repossessed by the lender are also known as bank-owned or REO properties (Real Estate Owned by the lender).
Mortgage Relief Options:
Loan Modification & Short Sale Assistance
If you have missed a few payments on your home loan and you feel you have no options – you do! You may have three or four choices including keeping your existing home and lowering your monthly payments. Time is of the essence, the sooner you contact us the more options you may have. Give us a call, email or you can fill out the form below for a free analysis of your situation and outline your choices. There is no cost or obligation for this consult and it is completely confidential. Terms:
Loan modification: A new mortgage rate, time frame, or other terms and conditions are modified on an existing loan.
Lien modification: The mortgage lender modifies the existing loan, making it possible for the borrower to qualify for refinance with a different lender.
Short sale: The mortgage lender allows the house to be sold at a price lower than the mortgage owed and forgives the borrower the balance of the debt. This is used as a last option to avoid foreclosure when other avenues are not feasible.
Deed in Lieu of Foreclosure: When a house in saleable condition has been on the market for at least 30 days without selling, the bank may accept the deed to the house in lieu of foreclosure and forgive the balance of the debt.
Call or email us if you have any questions or need any information.