Short Sales for Homeowners in the Sacramento Area

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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Making Home Affordable HAFA Short Sale Video

Home Affordable Foreclosure Alternatives (HAFA) Program
In 2009, the Treasury Department introduced the HAFA Short Sale program to provide a viable option for homeowners who are unable to keep their home through the existing Home Affordable Modification Program (HAMP). The HAFA program took effect on April 5, 2010 and ends on December 31, 2012. The HAFA program offers up to $3000.00 to the homeowner for relocation assistance at the completion of the short sale.

HAFA provides incentives in connection with a short sale on eligible loans. Servicers participating in HAMP are also required to comply with HAFA.

HAFA Provisions

Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.
Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.
Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).
Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).
Uses standard processes, documents, and timeframes/deadlines.
Provides the following financial incentives: $3,000.00 for borrower relocation assistance, $1,500 for servicers to cover administrative and processing costs; Up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.
Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

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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.

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

For more information Click Here - IRS Guidance regarding The Mortgage Forgiveness Debt Relief Act of 2007

The Mortgage Forgiveness Debt Relief Act of 2007 does not apply to short sales on Second Homes or Investment Properties. However there are Exclusions that apply. Consultation with an experienced tax professional to see how the law applies in your circumstance is advisable. For more information see IRS Publication 4681.

Tax Considerations of a Short Sale - State of California
On April 12, 2010, SB 401, the Conformity Act of 2010 was enacted. It allows taxpayers who had all or part of the loan balance on their principal residence forgiven by their lender to exclude the forgiven debt from California gross income. The new law applies to discharges of qualified principal residence indebtedness on or after January 1, 2009, and before January 1, 2013.

For more information about SB 401, the Conformity Act of 2010 Click Here

New Law Gives California Homeowners Deficiency Protection After A Short Sale
July 15, 2011 - A new California law bars junior lien holders from pursuing borrowers to collect outstanding loan balances after a short sale has been completed.

Governor Jerry Brown signed SB 458 into law on Friday. It requires all lenders that agree to a short sale to accept the approved sale price as payment in full of the outstanding balance of all first and secondary loans.

Last October, California enacted SB 931 mandating first mortgage holders absolve borrowers of any debt deficiency not covered by the short sale price, however that rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens.

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 Sacramento 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.”