SHORT SALES

Unfortunately, short sales are still a reality in our market.  Following the bursting of the housing bubble in 2008, it seemed the majority of listings on the market were either short sale or foreclosure listings.  Today we are in different type of market where many home owners have equity.  Even with that said, there are still quite a few distressed home owners. Short sales are a positive alternative to foreclosure. For home owners who are struggling to make their payment and owe more than the home is currently worth, the best solution is most likely a short sale.

A short sale in real estate occurs when the outstanding obligations (loans) and cost of selling are greater than what the property can be sold for. Short sales are a way for the home owner to avoid foreclosure, to better protect their credit and to be released from their debt obligations by settling with their lenders.

In California, a notice of default will typically be filed by the lender after the third missed payment. Three months after the notice of default goes out, the lender may file a notice of trustee sale, this will set a foreclosure date. The process typically takes about four months. 

California Senate Bill 931 (SB 931) – This requires that first mortgage lenders forgive the deficiency when they accept a short sale on a dwelling with up to 4 units. (The deficiency is the difference between what was owed on the mortgage, the expenses of sale, and the amount it was sold for during the short sale). Without the protections of SB 931, an individual short sale seller had to negotiate to make sure that the bank forgave the deficiency in the short sale approval.  The uncertainty has been removed when dealing with a first mortgage lender in California by this new SB 931 legislation.

California Senate Bill 458 (SB 458) – This prevents junior lien holders who have accepted a short sale from pursuing a deficiency against the short sale seller.  This law expands the protection provided in Senate Bill 931, and is a major development in the area of California short sales. 

Just as you initially had to “qualify” for the home loan, the short sale process is “de-qualifying” for the loan. This means the same process used to obtain the loan (tax returns, pay stubs, bank statements, etc) are now provided to the lender to help document the need to exit from the mortgage obligation.  

Many short sales involve no financial contribution from the homeowner and include a full release from the liability of the loan(s).

Also, in some situations, a seller will receive “relocation assistance” from the lender.

Contact me at your convenience if you would like to discuss the various options available to you.  I can be reached at 925-451-6679 or dwagley@kw.com