Are you in good hands?

The reason that most home owners attempt to do a short sale on their property is to avoid the stigma of a foreclosure. Home owners want to salvage their credit and they think that a short sale is the answer.  There is a lot of different advice and opinions floating around about the best thing to do if you are facing foreclosure. Just Google foreclosure or short sale and see what you get! Before you decide if a short sale is for you or not, you need to look at the good, the bad, and the ugly.

No one can tell how a short sale will affect the sellers credit, tax liability, or future financial responsibility until the very end of the transaction when the lender gives their approval on the short sale. In the approval or demand letter the lender issues spells out how they are going to report the payment of the borrowers debt, if they are going to make the seller sign a promissory note for the deficiency, or reserve their right to come after the homeowner for a Deficiency Judgement.

Every state has different foreclosure laws and regulations that affect short sales. If you are a homeowner in California make sure that you educate yourself on the California foreclosure laws. Before you make a decision on whether a short sale is right for you PLEASE educate yourself, seek the advice of your attorney and accountant, and find a Realtor who has been trained in Short Sale Negotiations.

In California there is a big difference between original purchase loan, refinanced loan, second loan-original purchase, and a line credit or second-not original purchase and their affect on the short sale process.  Some loans are non-recourse, like the original purchase loan, and some are recourse, like a refi. The best thing for a seller to do before deciding to do a short sale is talk to an attorney and an accountant. Everyone’s situation is different depending on what type of loan they have. Again I can’t stress enough how important it is to educate yourself about the foreclosure process in California.

I am always available to help with a short sale or any other real estate need in Redding & Shasta County. I promise to always give you my educated opinion and never just tell you what you want to hear.

Thanks for stopping by my blog…

The good, the bad, and the ugly about short sales and the seller in California.

The reason that most home owners attempt to do a short sale on their property is to avoid the stigma of a foreclosure. Home owners want to salvage their credit and they think that a short sale is the answer.  There is a lot of different advice and opinions floating around about the best thing to do if you are facing foreclosure. Just Google foreclosure or short sale and see what you get! Before you decide if a short sale is for you or not, you need to look at the good, the bad, and the ugly.

‘The Good’…In a perfect world a homeowner facing foreclosure would contact a reputable Realtor who knows how to correctly handle a short sale. That Realtor would then explain the pros and cons of doing a short sale to the homeowner. The property would be PRICED CORRECTLY, marketed, and sold for the best price possible in the current market. The short sale would then be negotiated in a reasonable amount of time, say 30 days, by said competent Realtor. The homeowners lender would agree to the short sale terms, because everyone involved can see that this is the best course possible given the current housing market and economy in general. The lender would agree to release the homeowner of all liability concerning  the deed of trust on the house and report the loan as, paid in full without benefit of deficiency judgment, to the credit bureaus. The homeowner wouldn’t be liable for any taxes on the forgiven debt because the loan is an original purchase loan. The homeowner gets to walk away from their impending foreclosure with minimal damage to their credit and start fresh. Ah…the perfect world…the perfect scenario…

The above situation is to everyone’s benefit, the seller, the buyer, the lender, the community, and I believe, our economy.  Unfortunately ‘The Good’  it isn’t the way it has been working out, but we are seeing glimmers of hope for 2010. The Treasury Department has just come out with some new guidelines for Short Sales that I will address in an upcoming blog.

My next article will be on ’The Bad’ & ‘The Ugly’ possibilities with short sales and the seller. Subscribe to my RSS feed if you want to get the second part of the article as soon as I publish it on my blog. Don’t hesitate to contact me with any questions you may have about short sales or real estate in general.

Thanks for stopping by…

Lauri Gibson

What is a Short Sale?

As you can imagine, as a Realtor, I get a lot of questions about short sales and foreclosures. I find that while most people understand in general what a short sale is, the details are a bit fuzzy. This is the first article, in a series, about the short sale process. My goal is to explain the process well enough that you will be able to decide if a short sale is something you want to tackle. Whether you are a buyer or a seller the more information you have, the greater the chance of having a successful experience.

In this article I will try to explain in simple terms what a short saleis and how it relates to the foreclosure process. I am a Realtor in Redding, CA and my information is specific to California and how I understand the process. I am not an attorney or an accountant so my advice is based on a real estate professionals perspective. Anyone thinking of  selling their home in a short sale situation should seek the advice of both an attorney and an accountant before proceeding.

In a short sale a house is sold for an amount less than the what is owed on the loan/loans secured by that property. Simply put, if the loan amount is $300,000 but in the current market the house will only sell for $200,000 this would be a short sale situation. The lender/investor who holds the promissory notehas to agree to accept a lesser amount as a payoff. A common misconception is that the lender must participate in a short sale. This is not true, it is ultimately up to the lender to decide whether to accept a short payoff on their note or not. The short sale process has many different factors that affect the outcome and is different with each lender and seller’s situation. You need to have a Realtor who is trained and experienced in short sales and who you trust to guide you through the process.

Typically a house in a short sale is already in the foreclosure process. It is possible to get a lender to agree to a short payoff when the house is not in foreclosure, but it is unusual. For our purposes we will assume that the house is in foreclosure. To understand a short sale you need to understand the foreclosure process. The foreclosure process starts when a borrower becomes delinquent on their loan and the bank records a Notice of Default (NOD). Once the NOD is recorded the foreclosure process is officially started. In California the typical foreclosure process is a non-judicial foreclosure or Trustees Sale. The timeline for a trustees sale is generally a minimum of 3 months for the NOD period, then a notice of sale is recorded, then it is 25 days till the sale date. It can be a longer time frame, but that is up to the lender.

A short sale generally takes place during the foreclosure time frame. Often a lender will delay the notice of sale or the sale date if the borrower is involved in a short sale, a loan modification, or bankruptcy. There are numerous pitfalls to this whole situation, for both the buyer and the seller.

On a final note (don’t worry–more to come) there is nothing short about a short sale except the payoff to the bank. If you decide to become involved in a short sale expect it to take  3 to 6 months to complete the process. Sometimes the time frame is shorter, but don’t count on it!

As always I am here to answer any of your real estate questions.

Lauri