I f you owe more than your Orange County, California house is worth and can't afford your payments, you might be able to sell it for less than you owe -- without having to pay the lender the difference. If you can no longer make your mortgage payments and your home is upside down, a foreclosure may not be your only option. A Short Sale is a sale of a home in which the market price is less than what is still owed on the home. It is a procedure sometimes agreed to by banks and mortgage lenders who often prefer to take a small loss, rather then going through a lengthy and costly foreclosure process. If you have been considering a short sale, or if you have been looking for help with one, you have come to the right place!. To assist you, you will need an experienced real estate team of short sale experts, including a licensed Realtor and professional negotiator. To help with a short sale or if you are facing foreclosure, continue reading to see how I can be of assistance!
A HAFA short sale is part of the Home Affordable Foreclosure Alternatives program, which was created in 2009 by US Government. If you qualify for a HAFA short sale, you can receive $10,000 in moving assistance funds (up from $3,000). Read more about this type of sale in my Short Sale Questions and Answers section below.
Doing a short sale of your home is a serious matter. Many of my clients have come to me only after trying to do a loan modification. In many cases, they have paid a large sum of money to a modification firm and have received no results! There are many scammers out there so beware!
Warning! Do not pay an advance fee to a firm that claims that they will help you modify your mortgage!
When you are facing financial difficulties, it is very important to stay informed - Here are a couple of links on foreclosure rescue or loan modification scams :
Mortgage Assistance Relief Scams (from the FTC)
Beware of foreclosure rescue scams! (from FannieMae)
There are also several free resources for distressed homeowners:
Speak with a HUD-approved housing counselor at no charge - (800) 569-4287
Homeowners Hope Hotline - (888) 995-HOPE
If you are losing your home due to income or job loss, divorce, or other cause and you are either facing foreclosure or considering a short sale, what are your options?
Refinance - If you qualify, one of your best options may be a Home Affordable Refinance . You can read more about it here: MakingHomeAffordable.gov
Lender workout - Ask your lender to spread out the back payments and fees over a fixed number of upcoming payments, or ask for a loan modification, where they will forgive back payments or recast the loan into a new one with a fixed rate ( Note: See waning on loan modification scams above. Do not pay a third party to do a loan mod for you - Work only with your existing lender).
Sell and bring cash to closing - This one is difficult for most people because it involves cashing out an IRA, 401K, or savings account to pay off back fees and the loan balance, but it may be a solution for some people.
Deed in Lieu (of foreclosure) - In this scenario, the homeowner trades the deed to the lender in exchange for a guarantee that the lender will cancel the note and forgive the debt.
Short sale - You sell your home for less than the amount owed, in cooperation with the lender(s) who forgive the debt.
For all of the options above, I would always advise you to consult with an attorney, tax advisor, or financial advisor. Real Estate agents (like myself) are not qualified to offer advice on tax, financial, or legal matters.
While it may seem surprising that lenders would agree to accept less than what they are owed, they benefit by not having to go through the process of foreclosing on the borrower and then having to put the property on the market. A market saturated with foreclosures can cost lenders billions -- and as much as $50,000 or more, per foreclosure
The home has an adjustable rate mortgage with payments that are no longer affordable
Income loss due to job layoff, illness, etc
Loan modifications did not produce the desired results
To avoid a full foreclosure which may be far more harmful to your credit
There are several steps required to initiate the short sale process and to list your home. These include signing a standard listing agreement which authorizes me to market and sell the home. There may be a few additional forms to sign, including an addendum that explains your rights as the seller and informs you about other details or possible consequences of the sale.
There are also several items you will need to provide to me or my negotiator to allow us to speak with the lender on your behalf and to justify the necessity for selling your home. Many of these items are listed below. I will perform all of the necessary steps to market your home including taking photos, putting your home on the MLS (Multiple Listing Service), putting up a yard sign, and installing a lock box so agents can show your home.
Items that are typically needed from you to start the process:
This outline may not include all items that take place or be asked to be completed by the bank. It’s intended to be an average list of items that may be required to complete a transaction.
Authorization letter to bank; this gives the bank permission to talk with me or my negotiator
Listing agreement signed and forwarded to bank with Comparative Market Analysis (a document that I prepare)
Hardship letter - Several paragraphs that explain your circumstances and reason that you need to sell.
Two months pay stubs
Two months bank statements
Two years of W-2’s
Two years of tax returns
Payment coupon for home payment
Items lender may consider while reviewing your request:
Do you have investment/rental properties
Do you have a savings account
Do you have a 401K
Are property taxes current
Are Homeowner Association dues current
Is your home loan a purchase money loan or refinance with cash taken out?
Other income including child support, alimony, dividends, etc.
Once we receive an offer:
I will submit the offer to my negotiator. This will then be forwarded to the lender along with the rest of the package.
Lender assigns an “opener”
“Opener” orders appraisal and/or Broker’s Price Opinion
Once “opener” reviews comparables, appraisal and Broker Price Opinion, it is forwarded to bank negotiator
Negotiator may request new seller financials (updated from original submission)
Bank may request Buyer information to do a background check on buyer.
Offer(s) then turned over to senior management at bank. This process may take another month or two.
After senior management approves, the offer is returned to the negotiator with the bank’s terms for acceptance.
Buyer may or may not accept the bank’s terms and conditions; if buyer elects to not go forward, deposit monies should be returned to the buyer.
If buyer accepts new terms, escrow is opened and contingency periods will commence on bank’s acceptance date.
You've successfully sold your home in a short sale, so now what? Most people prefer to stay in the same community where they have lived for many years, where their kids have gone to school, and where they have established friendships. Your best bet is usually to lease or rent a home for a while, until you are prepared to buy again. This can be difficult however because of credit challenges that may have resulted from the short sale, missed mortgage payments, or from other financial difficulties.
If my team assists you by selling your home in a short sale, we will also help you with your next move! We are leasing experts who handle many more home leases per year than the average real estate agent in Orange County. We have the experience and know-how to work with landlords and credit issues so that you can find your next home!
Our strategy is to start shopping for leases with you while your home is still on the market. For some of our clients, moving out while the home is for sale and getting the former home behind you, helps lift the emotional burden of the short sale. For others, we will be happy to help with your new lease after escrow begins, so that you can make a smooth transition when your short sale closes. Either way, helping you find a new home is a key part of what we do for you and for your family!
O f course you will have many questions and I have addressed some of them below. Please fell free to contact me if you have additional questions. I will be happy to discuss your situation by phone or in person.
What is a short sale?
A “short sale” refers to a situation where your are selling your home but you not have enough equity to be able to sell the property, pay off liens and cover selling expenses. In other words, there is more owed on the home than what it can be sold for on the market. Lenders use the term to describe this as a loan that is “upside down.” While many sellers are potentially facing foreclosure, a short sale may also be necessary for a seller who bought high and took out a lot of equity and might be forced to sell due to a divorce, illness, or job transfer.
Do you handle the whole process?
I handle the sale of your home and all negotiations with your lender(s). This takes much of the worry out of the process for you. You are still advised to consult with various professionals such as your tax advisor, CPA, or financial advisor, as we cannot offer advice outside of our area of expertise.
What costs are there to me as the seller?
You should not have any out of pocket expenses. Real estate commissions and the negotiator fees will be paid by the buyer and agents, not by you. I will also list your home as being sold "as is, where is, without warranty"'. Buyers understand that you are going through a distress sale and you will not be required to make home repairs or pay for closing costs, home warranty, termite repairs, etc.
Will the short sale affect my credit?
Yes it will, but typically less so than with a foreclosure. There is no concrete rule since lenders act independently. In general, a short sale could reduce your FICO scores by 75 to 125 points while a foreclosure could reduce your FICO scores by over 200 points. Also, a foreclosure remains on your credit history for seven years. These are only estimates and actual impact to your credit could vary widely. The bottom line is that it is impossible to specify the exact number of points by which a short sale or foreclosure will lower your credit score . You are always advised to consult with your CPA, attorney, financial advisor, or lender for more specific information on how your credit could be affected by the transaction.
What about escrow fees, title, and other costs?
The lender typically offers to pay a certain amount toward these costs. I always send an addendum to the buyers and their agent to inform them that you (the seller) will not be obligated to pay any closing costs in excess of the lender contribution.
What if I have more than one loan?
We analyze your situation to see if you will be short on all loans or perhaps just the second or third. In some cases, the first lender may receive full payoff, in which case you will just be short on the second. In either case, my negotiator will contact all of the lenders and work with them to negotiate your sale. The second or third lenders understand that they will receive nothing if the first lender forecloses. As such, many of them are willing to negotiate a settlement and they are generally willing to cooperate with the first lender in selling your home.
What is an "approved" short sale?
In the context of the current sale, the lender(s) have provided an approval letter stating terms and conditions, along with an expiration date. It is imperative that the deal is closed on or before this date, or the approval expires. It is a different matter for short sale listings that claim to be "approved". Technically, they should be called a "previously approved short sale" because it refers to a situation in which the lender had agreed to all of the terms, including price, real estate commissions, closing costs, etc, with a previous buyer . Agents commonly use the term "approved short sale" to let subsequent buyers know what the lender(s) had previously agreed to. It does not mean that they will automatically agree to these same terms with a subsequent buyer. The lender(s) will usually start the process all over with a new buyer, but at least the listing agent has a benchmark of what might be expected from the lender(s).
In order to approve the short sale, how will my lender determine fair market value of my home?
The lender typically does an appraisal or BPO (Broker Price Opinion). A BPO is usually done by a real estate agent who has been hired to perform a valuation of the subject property based on comparable sales.
How long will the short sale take?
Generally no less than 60 days but sometimes longer, depending on how may loans are on the property, the difficulty of negotiating with various lenders, etc.
What if I am already in foreclosure or if my lender has assigned an auction date?
We will do our best to obtain a postponement of the auction date by notifying the lender that you are in the process of a short sale. Generally speaking, they will be willing to work with you, as they prefer a short sale to taking back a property through foreclosure. The final decision is always up to the lenders however, and we cannot guarantee that we can stop foreclosure proceedings.
Can you do a short sale while in foreclosure?
I n many cases, yes; especially if it is early in the process. People often turn to a short sale while they are in the pre-foreclosure stage. Once you are close to an auction date it may be more difficult.
Can I do a short sale solely because my home has dropped in value?
No, you must have a legitimate hardship like a divorce, job loss, loss or reduction of income, illness, death of spouse, etc. A loss of equity or drop in value alone is not considered be a legitimate hardship.
What is a HAFA short sale?
A HAFA short sale is part of the Home Affordable Foreclosure Alternatives program, which was created in 2009 by US Government agencies to help improve the short sale process. You can read more about a HAFA short sale here: HAFA short sales
Some of the highlights are:
Allows borrowers to receive pre-approved short sale terms
Requires borrowers to be fully released from future liability for the first mortgage debt, and if a subordinate lender received an incentive under HAFA, that debt is released as well
Provides up to $10,000 in moving costs for borrowers and up to $10,000 to pay off subordinate liens (2nd loan holders)
What are the qualifications for a HAFA short sale?
The home must be your principle residence
Your loan must have originated before 2009
Your mortgage is delinquent or you are close to a default
Your unpaid principle balance is no more than $729,750 (higher limits for mult-unit properties)
Your total monthly mortgage payment exceeds31% of gross income
If you have additional questions on a HAFA short sale or any other questions on Short Sales, please feel free to call me.
I use a professional negotiator to expedite the process
Unlike many other agents who spend their time trying to personally work with bank asset managers, I use a professional negotiator who has an exceptional track record of successfully negotiating short sales. I do this at no cost to you!
My high-technology tools help get offers on your home and get it sold, quickly
One of the first steps is to get offers on your home. My technology tools and great photography help ensure that we will attract buyers and get offers on the table!
I will not list your home with a "teaser" price!
There are many reasons why a short sale can be a turn-off to a buyer. One of the main reasons is often the miss-leading "teaser" price. There are reasons why many agents do this and it is explained in detail on my all about short sales page. Instead of a teaser price, I will always list your home at fair market value to help attract legitimate, qualified buyers.
There is little or no cost to you
I will list your home for sale in "as is, where is" condition, so that you will not have to pay for repairs, termite damage, or other closing costs.
I help you with your next move
If you need to find a lease or rental after your home is sold, my team will be glad to help! As one of the top home leasing teams in Orange County, we will be able to help you find and apply for a home in a price category that is comfortable for you and your family.
I have included several links to help keep you informed:
Feel free to contact me at any time to discuss your short (or standard) home sale! I will be happy to discuss with you and answer all of your questions. I will be glad to help you with a short sale of your home in Mission Viejo, Lake Forest, Dove Canyon, Rancho Santa Margarita, Coto de Caza, Dana Point, Ladera Ranch, Talega, Fullerton, Yorba Linda, Anaheim Hills, Laguna Niguel, Aliso Viejo, Irvine, Brea, Orange, Anaheim, or any other area of Orange County, CA. Orange County short sale specialist.
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homeowners are always advised to consult with a real estate attorney and/or their tax advisor or other professionals regarding potential promissory notes, taxes on forgiven debt amount and any other financial implications of a short sale. They should also consider loan modifications and working with the lender as initial alternatives to doing a short sale.