Short Sale Misunderstanings

PointLoma San Diego Real Estate                   

Short Sale Misunderstandings

2012 has been dubbed the year of the short sale. It is important to get correct information to know how to proceed.

1.      The homeowner must be delinquent in their monthly payments in order to allow the short sale.

NOT SO: This may have been true, but not in 2012. There does need to be a legitimate reason for the short sale: loss of job or income, health or medical issues, divorce, etc.

2.      Foreclosure is what the banks would prefer to do rather than approve a sort sale.

NOT SO: Banks would prefer not to foreclose as it may cost the bank more money per transaction. It actually costs them less to do a short sale than to foreclose.

3.      The seller must be pre-approved by their lender to be able to do a short sale.

NOT SO: Most lenders will consider a short sale. Each bank will have their own process to follow which needs to be followed carefully in order to have a successful short sale transaction.

4.      Short sale transactions never close.

NOT SO: Short sales do close.

5.      Short sales take months and months and months to close.

NOT SO: Lenders are striving to refine the short sale process so as to take less time to close. Good communication between the homeowner, the agent and the bank is key to a successful close.

6.      The homeowner will have damage incurred to their credit as compared short sale and foreclosure.

NOT SO: Many times the credit consequence is more damaging in a foreclosure as compared to the short sale. Financial recovery can come quicker when proceeding with a short sale.

7.      After a short sale the homeowner will not be able to purchase property for the next 5-7 years.

NOT SO: Depending on the lender, some folks have been able to purchase property in as little as 24 months.

8.      The homeowner will receive a 1099 after the short sale transaction and must declare the loss as income.

NOT SO: The will receive a 1099, but because of the Mortgage Forgiveness Debt Relief Act, the homeowner may not owe any taxes.

9.      The homeowner will be sued by the lender after the close of the short sale for the deficiency.

NOT SO: California has certain anti-deficiency protections in place, depending on the circumstances.

10.  There is no need for additional training for the agent to learn about the short sale process.

NOT SO: It is important to keep updated on the short sale process to ensure a successful close for the homeowner.

 Whatever the circumstance be sure to ALWAYS seek legal and tax  advice to ensure the consequences to your situation.

 

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