What is a short sale?
A short sale is a real estate transaction in which the property is sold for less than the seller owes on it. In order to complete a short sale transaction, the seller must get permission to sell the property from all trust deeds on title to the property.
What is the difference between a short sale vs. foreclosure?
In a short sale transaction, the seller and their lender work together to sell the property for less than what is owed. Although the bank usually agrees to take a large loss, the seller may have to contribute to the transaction as part of the approval terms. In a foreclosure the bank takes the property back as collateral and tries to sell the property on their own via their back books or an REO agent.
Why should I short sale rather than foreclose?
There are many reasons to choose a short sale over foreclosure. When you choose to short sale rather than foreclose, the bank and other creditors view you as having helped to mitigate the banks loss. Because of this, short sale does not tarnish your credit like a foreclosure would. Generally a foreclosure will affect your credit for 5-7 years where as a short sale will affect it for as little as 1-2 years depending on whether or not you missed any mortgage payments. Additionally, a foreclosure does not protect you from being pursued by 2nd and 3rd trustees for deficiency balance. In a short sale, we try to settle those debts.
What is a deficiency balance?
A deficiency balance is the balance that is owed to the lender after the short sale or foreclosure is completed. It is the difference between what they were owed and what they received at the time of transfer.
What happens to the deficiency balance after the short sale is completed?
It depends on the terms of the short sale approval. Due to SB 458, in the state of California, all mortgage trust deeds must agree to settle their debt & waive the deficiency balance if they approve the short sale. However, there may be other liens or loans on title that are not subject to that law. Those creditors may chose to release their lien so that the short sale can be completed, but still reserve the right to collect on the outstanding balance. The right to pursue a seller for a deficiency balance depends on the original loan note, state and federal law, and the terms of the short sale approval.
How do I know if my debt is settled?
You should always speak with a real estate attorney and or a tax attorney about the terms of your approval and what your legal obligation to the debt will be. Realtors are not lawyers and cannot advise you as a lawyer.
How long does a short sale take?
Each file is different. Turn times vary between lenders and investors. The average time to complete a short sale is 90-120 days.
Will the bank pay delinquent taxes?
Although every lender/investor has different, guidelines, a majority of them WILL pay delinquent taxes in California. This is because California is a Property Tax Super Lien State. Taxes supersede mortgage loans and thus the banks/investors will most likely pay the taxes to accommodate the short sale.
Will the bank pay delinquent HOA dues?
Although every lender/investor has different guidelines, a majority of them will NOT pay anything towards HOA's in California. This is because California is NOT an HOA Super Lien State. HOA liens are subordinate to mortgage liens and thus the banks/investors will not pay in most cases.
For more answers and further clarification, please contact me directly, and visit www.sdhprocessing.com
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