Vikki Shore can answer your questions about short sales in Southern California and if this is a viable option for you.
Call Vikki today (909) 899-1206
Sunday
WHAT IS A SHORT SALE?
A short sale is when you reach an agreement with your lending bank to sell your home for less than the current amount you owe, including penalties and fees.
Thursday
Vikki Shore, Short Sale Specialist
Vikki Shore is a licensed real estate broker in Rancho Cucamonga who has been a real estate professional for decades. She can give you a customized analysis of your particular situation and whether a short sale is right for you.
Vikki can also find you a lovely rental home to transition to.
Give her a call at 909-899-1206.
Vikki can also find you a lovely rental home to transition to.
Give her a call at 909-899-1206.
DO YOU QUALIFY FOR A SHORT SALE?
Your bank will look for a hardship that has occured that explains why you can no longer make your loan payments. For example you lost your job, your income has been reduced, expenses have increased such as medical bills and divorce.
Your property must be worth less than the total amount of your mortgage debt including fees and penalties.
Your property must be worth less than the total amount of your mortgage debt including fees and penalties.
WILL YOUR BANK AGREE TO A SHORT SALE?
Banks are accepting short sales as a way of settling their mortgage debts in record numbers. Why?
With rampant loan defaults, lenders are inundated with foreclosed homes. They want to clear out their inventory and stop the flow of more properties into their portfolios.
Accepting less than the amount owed now is more attractive than going through the lengthy and expensive process of a foreclosure, taking the property back and having to market and sell property with little chance of recovering the full amount due the bank. A foreclosure can be more costly to the bank than a short sale even though the return is substantially less than what is owed.
With rampant loan defaults, lenders are inundated with foreclosed homes. They want to clear out their inventory and stop the flow of more properties into their portfolios.
Accepting less than the amount owed now is more attractive than going through the lengthy and expensive process of a foreclosure, taking the property back and having to market and sell property with little chance of recovering the full amount due the bank. A foreclosure can be more costly to the bank than a short sale even though the return is substantially less than what is owed.
WILL I STILL OWE THE BANK AFTER THE SALE?
A new law went into effect on July 15, 2011 in California that made it easier for the homeowner to get complete debt relief after a short sale.
Before SB 458 was passed, lenders often had the ability to pursue the borrower personally for the difference between the amount owed and the amount collected through the short sale. This difference is called a 'deficiency'.
Here's an example of a bank going after the deficiency. A reader writes:
In January 2010 we completed a short sale in Upland, Californa where there was a Bank of America first trust deed of $440,000 and a Chase second trust deed of $155,000. We found a buyer willing to purchase the property for $350,000. Bank of America agreed to accept a short pay off and gave Chase $3,000 to allow the sale to proceed. Seven months later we received a call from a debt collector representing Chase, that demanded $65,000 to settle the second. We thought the short sale would leave us free from mortgage debt but we were wrong. Our agent didn't understand that the short sale approval we received from Chase did not protect us from personal liability.
There are many examples where the sellers entered into short sale agreements with their banks that did not guaranteed them debt relief after the sale.
Since the passage of this bill, however, lenders in first position, and in many instances those in junior positions, are restricted from collecting any deficiency after a short sale they agreed to in writing.
There are exceptions. For instance the law applies to residences between one to four units, it does not apply to borrowers who are corporations or a political subdivision of the state nor to borrowers who committed fraud with respect to the sale or who severely damaged the property.
Homeowners are urged to consult with their legal and tax experts for details.
Before SB 458 was passed, lenders often had the ability to pursue the borrower personally for the difference between the amount owed and the amount collected through the short sale. This difference is called a 'deficiency'.
Here's an example of a bank going after the deficiency. A reader writes:
In January 2010 we completed a short sale in Upland, Californa where there was a Bank of America first trust deed of $440,000 and a Chase second trust deed of $155,000. We found a buyer willing to purchase the property for $350,000. Bank of America agreed to accept a short pay off and gave Chase $3,000 to allow the sale to proceed. Seven months later we received a call from a debt collector representing Chase, that demanded $65,000 to settle the second. We thought the short sale would leave us free from mortgage debt but we were wrong. Our agent didn't understand that the short sale approval we received from Chase did not protect us from personal liability.
There are many examples where the sellers entered into short sale agreements with their banks that did not guaranteed them debt relief after the sale.
Since the passage of this bill, however, lenders in first position, and in many instances those in junior positions, are restricted from collecting any deficiency after a short sale they agreed to in writing.
There are exceptions. For instance the law applies to residences between one to four units, it does not apply to borrowers who are corporations or a political subdivision of the state nor to borrowers who committed fraud with respect to the sale or who severely damaged the property.
Homeowners are urged to consult with their legal and tax experts for details.
WILL YOU OWE TAXES AFTER A SHORT SALE?
The IRS states that if you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable. When a lender forgives any amount of the debt owed by the borrower, that borrower could incur a tax liability.
However, there is the Mortgage Debt Relief Act of 2007 that generally allows 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, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is 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.
Please consult with legal and tax experts for details.
However, there is the Mortgage Debt Relief Act of 2007 that generally allows 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, qualifies for the relief.
This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion ($1 million if married filing separately). The exclusion does not apply if the discharge is 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.
Please consult with legal and tax experts for details.
Subscribe to:
Posts (Atom)