San Diego California Short Sales

Navigating San Diego California Short Sales

The San Diego distressed homeowner needs an advocate that will act in their best interest and help them identify the best solution to their financial situation.  As a San Diego short sale may be best and quickest way to mitigate loss and hedge against declining values, the best individual suited for this role is a well informed, educated and experienced Realtor.

San Diego Realtors that accept this task and work with distressed homeowners will find this to be the most rewarding work they do in real estate.  Below are a few FAQ's that will answer your San Diego short sales questions.  

What is a short sale? When the owner of a mortgage loan allows a homeowner to sell their home for less than what is owed on the mortgage.  As part of the deal, the lender forgives some or all of the debt.

Why do banks or lenders want to do this? To avoid foreclosure.  Foreclosures are a more time-consuming and costly process for the bank/lender and the homeowner. When a property is foreclosed upon, the incurred loss on average is 10% to 12% higher than that of short sale. 

Why would a San Diego homeowner agree to short sale versus a foreclosure?  To get out of a burdensome loan that is causing financial hardship. Short sales do not inflict as much damage on a person's credit as a foreclosure would.  If a short sale is approved by your lender, you may qualify to purchase another home with a Fannie-Mae backed mortgage within two years and three years for an FHA mortgage.

With certain restrictions, you may be eligible to purchase a home five years after a foreclosure.  Without restrictions, the wait will be seven years.  

What will happen to my credit score if I short sale versus foreclose?  A short sale may be considered to be a derogatory mark on your credit even though credit bureaus do not show the word "short sale" on your credit report. It may say "paid in full for less than agreed" or "settled for less," among other categories. Some clients have reported negative FICO score drops from 50 points to 130 points.

FICO score drops from 200 to 400 points after a foreclosure. Generally this credit score will remain on your credit report as a public record for 7 to 10 years.

I think need to Short Sale my house; what do I do?  Choose a San Diego real estate agent well-versed in the short sale process.  A short sale is a process for professionals who have been trained to handle these transactions. To avoid both financial and legal matters, I highly recommend as does the the California Department of Real Estate (C.A.R.), that you seek consultation with a certified public accountant (CPA) and an attorney.

What are the Consequences? There are several potential consequences when short selling your home; (1) a chance the bank/lender could sue you for the debt that it had supposedly forgiven. (2) you could be taxed on the forgiven debt. The Internal Revenue Service may look at the forgiven debt as income and thus tax you. (3) If there is a second and/or third loan, those lenders might try to get their money back in civil court.

Starting January 1, 2011, a seller's first trust deed lender cannot obtain a deficiency judgment against the seller after a short sale.  Providing written consent to a short sale shall obligate the first trust deed lender to accept the sales proceeds as full payment and discharge of the remaining amount owed on the loan.  This law applies to first trust deeds secured by one-to-four residential units, but does not limit the lender from seeking damages for fraud or waste by the borrower.  Governor Schwarzenegger vetoed Senate Bill 1178,  which would have extended California's anti-deficiency protection to refinance loans.

Realegal® is published by the California Association of Realtors

Is there any other help? In April 2010, a federal program was initiated to  help facilitate short sales.  The program Home Affordable Foreclosure Alternatives (HAFA) offers financial incentives and ways to stream-line the short sales process.  Like other government assisted programs, HAFA has specific guidelines and factors in determining qualification.

How do I know if a San Diego real estate agent is qualified to short sale my home?  Simply put, there are many qualified agent that can represent you.  However, there is a select few who have taken the time to receive advance education and training on the short sales process. Training includes; identifying and documenting your hardship, listing and marketing your home, ensuring the "exact" documentaion is presented to the bank/ lender or negotiator and proper and ethical negotiations throughout the short sale process. A qualified San Diego short sale agent should have the National Association of Realtors Short Sales and Foreclosures Resource (SFR) and/or Certified Distressed Property Expert (CDPE) designations.    

Set homeowner expectations - Homeowners and all parties involved need to understand the nature of a short sale transaction.  There is considerable amount of documentation, approvals and cooperation are needed from multiple parties.  This increases the possibility of delays in the process and therefore, the transaction may take longer than a typical home sale.   

 

  

 

  

Contact Information

Photo of Tom Conery & Bruce Rae Real Estate
Tom Conery & Bruce Rae
Best San Diego Properties Group
4305 Gesner Street, Suite 212
San Diego CA 92117
(858) 945-7833
(619) 507-2718
Fax: (619) 276-1740