Short Sales for Homeowners in California

This is Free Service to ALL Homeowners. No Fees. No Costs Whatsoever.

Is a Short Sale Better for Your Situation?
A Short Sale is when a home is sold for less than the amount owed and the lender agrees to settle for less than the full amount.

Why would a lender accept a Short Sale? A Short Sale is a form of loss mitigation, the lender (investor) is presented with a choice between a smaller loss through a Short Sale or a larger loss through foreclosure, so accepting the Short Sale “mitigates the loss.”

The advantage of a Short Sale compared to a foreclosure is that you avoid having a “debt discharged due to foreclosure” on your credit file which can reduce your credit score by over 250 points and keep you from qualifying for a new home loan for up to 5 years. With a Short Sale you can qualify for a new home loan in just 24 months. In fact, some of our clients have qualified for a new home loan in a little over a year from the date the short sale closed.

Qualifying for a Short Sale
For a Short Sale to be approved by your lender you must show a hardship. A hardship is defined as a situation that is the result of some extenuating circumstance that forces you into a position where you can no longer afford the mortgage payments. Some examples of a hardship are loss of income, unemployment, divorce, illness and job transfer. However we also have negotiated short sales for borrowers who can afford their payments but their property is so far underwater the lender agrees to a short sale instead of a foreclosure.

Lenders will also allow a short sale on an investment property. Some examples of hardship include the amount of rent charged does not cover the mortgage payment and related expenses and you cannot afford to pay out-of-pocket to make up the difference. You are unable to rent the property at a price that covers all expenses. You can't afford to fix damages to the property that keeps you from renting it out.

Why Walking Away is not a Good Idea
Fannie Mae and other lenders have announced policy changes concerning borrowers who Walk Away. Fannie Mae announced in June of 2010, that defaulting borrowers who walk-away and had the capacity to pay or did not complete a workout alternative in good faith will be ineligible for a new Fannie Mae-backed mortgage loan for a period of seven years from the date of foreclosure.

Fannie Mae will also take legal action to recoup the outstanding mortgage debt from borrowers who strategically default on their loans in jurisdictions that allow for deficiency judgments.

Some people feel they can stay in their home longer if they refuse to work with their lender and walk away at the last minute. WE WILL WORK WITH YOU to maximize the amount of time you can stay in your home and still successfully complete a short sale.

There are circumstance where homeowners have given up and resigned themselves to a short sale but would prefer to keep their home. We have successfully used the short sale process to “buy time” until the homeowner regains their financial footing and is able to reapply for a loan modification.

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Benefit of a Short Sale When Buying A New Home
Fannie Mae's new policies for manually underwritten loans related to the time period that must elapse before borrowers can demonstrate they have reestablished an acceptable credit history after the occurrence of a short sale or foreclosure.

Short Sale
2-year time period from completion date.
Additional Requirements: None
Note: No exceptions are permitted to the 2-year time period due to extenuating circumstances.

Foreclosure
5-year time period from completion date.
Additional requirements that apply after 5 years up to 7 years following completion date:

  • The purchase of a principal residence is permitted with a minimum 10 percent down payment and minimum representative credit score of 680.
  • Purchase of a second home or investment property is not permitted.
  • Limited cash-out refinances are permitted for all occupancy types pursuant to the eligibility requirements in effect at that time.
  • Cash-out refinances are not permitted for any occupancy type.

Deed-in-Lieu of Foreclosure
4-year time period from completion date (date deed-in-lieu executed)
Additional requirements that apply after 4 years up to 7 years following completion date:

  • Borrower may purchase a property secured by a principal residence, second home, or investment property with the greater of 10 percent minimum down payment or the minimum down payment required for the transaction.
  • Limited-cash-out and cash-out refinance transactions secured by a principal residence, second home, or investment property are permitted pursuant to the eligibility requirements in effect at that time.

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Tax Considerations of a Short Sale - Federal
On December 20, 2007 President Bush Signed H.R. 3648, The Mortgage Forgiveness Debt Relief Act of 2007.

The Mortgage Forgiveness Debt Relief Act of 2007 generally allowed taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualified for this relief.

This provision applied to debt forgiven in calendar years 2007 through 2016. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion didn’t apply if the discharge was due to services performed for the lender or any other reason not directly related to a decline in the home’s value or the taxpayer’s financial condition.

The amount excluded reduces the taxpayer’s cost basis in the home.

The Mortgage Forgiveness Debt Relief Act of 2007 did not apply to short sales on Second Homes or Investment Properties. However there were Exclusions that applied.

Consultation with an experienced tax professional to see how the law applies in your circumstance is advisable.

For more information see IRS Publication 4681 - Canceled Debts, Foreclosures, Repossessions, and Abandonments.

California State Law Regarding Short Sales
In October 2010 California enacted SB 931 mandating first mortgage holders absolve borrowers of any debt deficiency not covered by the short sale price. However SB 931 did not apply to junior lien holders. In July 2011 Governor Jerry Brown signed SB 458 which extended the protections of SB 931 to junior liens.

The law generally prohibits a mortgage lender from collecting a deficiency or obtaining a deficiency judgment for a short sale involving a loan secured by a one-to-four residential unit property. (Cal. Code of Civil Procedure §580e). The law also generally prohibits a lender from requiring the borrower to pay any additional compensation, aside from the proceeds of the sale, in exchange for a short sale approval.

The law applies to first trust deeds, second trust deeds, and other junior trust deeds. It applies to purchase money loans, refinance loans, and home equity credit lines secured by one-to-four residential unit properties. For such refinances, the anti-deficiency protection for short sales applies to all types of refinance loans, regardless of whether the borrower refinanced to obtain a lower interest rate only or took cash out to make home improvements, to pay off credit cards, or for any other purpose.

It does not apply to other types of security interests in real property, such as, but not limited to, judgment liens, homeowners’ associations (HOA) liens, tax liens, child support liens, mechanics’ liens, attachment liens, or execution liens.

The anti-deficiency protection is for short sales involving owner occupied or non-owner occupied properties.

Some Exceptions to the anti-deficiency protections for short sales are:

  • Fraud with respect to the sale of the real property
  • Waste to the real property
  • Cross-collateralized loans
  • Borrower is a corporation, limited liability company, or limited partnership

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How Do I Get Started?
The first thing we need to do is evaluate your situation, which includes a conference call with your lender to understand your loan terms, investor, prior workout agreements, potential modification terms and current status i.e. months behind, in foreclosure, Trustee Sale. Only after discussions with both you and your lender can we determine if a Short Sale is the best solution and if there is enough time to complete a short sale. Many people have called us resigned to losing their home to happily find out we were able to negotiate a modification of their loan that made it possible for them to keep their home.

If a Short Sale is the best solution for you, we will immediately begin the process. A Comparative Market Analysis will be ordered and a listing agent will be assigned. A marketing strategy will be developed based on the time frame we have to complete the Short Sale.

Short Sales normally take 90 days to complete. Lender approval will take up to 60 days from the time an offer is submitted. Once approved 30-45 days will be given to close escrow.

Is There a Fee to Hire Your Company for a Short Sale?
Absolutely not. Our short sale services are provided at no cost to the homeowner.

What Areas do You Cover?
We cover the entire state of California.

If you are outside of the Los Angeles County Area, we will assign an agent experienced with short sales and an agent that is part of our statewide network of agents we successfully work with on a consistent basis.

The real estate agent will be responsible for listing and marketing your property and we are responsible for working with you, your lender or lenders, the title and escrow company, the buyer's agent and the buyer's finance company to successfully complete your Short Sale.

Let us be your Advocate.
We are Licensed Professionals with years of experience in the real estate and lending industries. We specialize in Loan Modifications and Short Sale Services.

Our philosophy can be summed up in one sentence - “Total commitment to our client's needs and what's best for them.” 

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California Bureau of Real Estate License #01783411