Short Sale Information

What is a short sale?

A short sale is the sale of a property for an amount that is less than what is currently owed. If your home is worth less than the amount you owe on your mortgage, then your best option is to short sale. We speak directly with your bank and the loss mitigation department to save your credit from a foreclosure and remove bad mortgage debt.

First, your lender will agrees to a short sale on the property due to a hardship. The lender then accepts an offer from a qualified buyer at the current market value and takes a loss on the loan. It is a benefit to the lender to proceed with a short sale rather than foreclose on your property. This lets the lender avoid future costs, such as auction fees, declining property value, and attorney fees.

Benefits of a short sale:

As a result of the mortgage crisis, many home owners have found that a short sale is far more beneficial than a foreclosure or a loan modification.  With a short sale, a borrower is eligible to purchase another property in as little as 24 months. The borrower’s negative debt from the property is forgiven, giving them the opportunity to re-establish their credit. 

During the short sale process, the borrower can stay in their property until the short sale is completed. Once the short sale process has been completed, you may receive up to $3,000 under the HAFA program. A short sale will allow you to stop a foreclosure proceeding and get a fresh start. 

The top benefits to the homeowner:

  • Negative debt on the property is forgiven.
  • You avoid foreclosure, which can stay on your credit history for up to ten years.
  • You can take pride in knowing that you sold your home and avoid the stigma of foreclosure.
  • You will be eligible to buy another home in 2 years instead of 5 to 7 years under Fannie Mae guidelines.
  • If your credit report does not reflect a 60 day plus late pay, you will be eligible to buy another home immediately under Fannie Mae guidelines.
  • You may receive up to $3,000 under the HAFA program for a successful short sale.
  • You may stay in your property until the short sale process is completed.
  • The entire short sale process is FREE with California Home Assistance.

Do I know if I qualify for a short sale?

Whether a borrower has never missed a payment or is on the brink of a foreclosure sale, California Home Assistance is here to help at no cost to you.  If you are currently facing a hardship, call our short sale experts today.

  • Are you upside-down on your current mortgage(s)? Click here to find out what your property is worth
  • Are you late on your mortgage payments?
  • Have you applied for a modification and have been denied?
  • Have you received foreclosure notices?
  • Have you received a Notice of Trustees Sale?
  • Have your mortgage payments increased?
  • Has your interest rate changed, and you can no longer make the payments?
  • Has your income dropped dramatically?
  • Have you lost your job?
  • Do you want to avoid future collections?
  • Has your job relocated?
  • Have you been hospitalized or had a death in the family?

If you answered yes to any of the above questions, call us as soon as possible. We can help you start the short sale process today.

Short Sale vs. Loan Modification

For many home owners who have been stripped of equity, a short sale may be a better solution than a loan modification.

Example:

John and Suzy purchased their first home in Riverside, California on October 2007 for $460,000. With the economic downturn, their home is now appraised at $220,000.

October 2007
Purchase Price: $460,000
Loan Balance: $414,000
Interest Rate: 6%
Loan Term: 30 Years
Principle & Interest Payment: $2,482
Taxes and Insurance: $500
Total Monthly Payments: $2,982
Current Property Value: $220,000

Equity: -$194,000 (Negative)

Sample Loan Modification Outcome:

Original Loan Balance: $414,000
Delinquent amount added to loan balance by lender: $25,000
New Loan Balance: $439,000
Interest rate (reduced): 4%
Loan Term (increased): 40 Years
Principle & Interest Payment: $1,834
Taxes and Insurance: $300
Total Monthly Payments: $2,134
Current Property Value: $220,000

Equity: -$219,000 (Negative)

Although John and Suzy’s monthly payment was reduced from $2,982 to $2,134, their loan term was increased from 30 years to 40 years. Also note that they are now $219,000 upside down on their mortgage (loan balance of $439,000 minus current property value of $220,000).

With their economic hardship, John and Suzy were unable to continue the loan modification payments and terms and chose to short sale their property with California Home Assistance. California Home Assistance found a rental property in the same community for a lease payment of $1,800 a month, which they will rent for 2 years. 

Short Sale Outcome:

Because John and Suzy short sold their property, they will be eligible, under Fannie Mae guidelines, to buy another home in two years instead of five to seven years if they had foreclosed on the property.

California Home Assistance will assist John and Suzy in repairing their credit and finding them a home to purchase in 2 years. 

After two years, considering the average appreciation rate of 5% annually on the property, John and Suzy’s new home may look like this:

Similar home in Riverside, CA
Current Value $220,000
Appreciated value after 2 years $242,000
Purchase Price: $242,000
Loan Balance: $218,000
Interest Rate: 6%
Loan Term 30 Years
Principle & Interest Payment $1,040
Taxes and Insurance $300
Total Monthly Payments $1,340

Equity: $24,000 (Positive)

By contacting California Home Assistance, John and Suzy will be able to own a similar home after two years and have their payment reduced from $2,982 to $1,340. They have also erased the negative equity of $219,000 and have positive equity of $24,000.

Get your free home evaluation today!

Short Sale vs. Foreclosure

Almost every option is better than foreclosure. Contact us today for a free consultation!

 Short SaleForeclosure
Deficiency Judgment Forgiven debt SB 931 - SB 458
(Tax Relief Act of 2007-H.R. 3648): You may not be held for the deficiency.
You may be held accountable for the remaining debt.
Future Home Purchase
Fannie Mae Loan
Primary Residence
You will be eligible to purchase and get a Fannie Mae-backed mortgage after only 24 months. You are ineligible to get a Fannie Mae-backed mortgage for up to 5 years.
Future Home Purchase
Fannie Mae Loan
Investment Property
You will be eligible to purchase and get a Fannie Mae-backed mortgage after only 24 months. You will be ineligible to get a Fannie Mae-backed mortgage for up to 7 years.
Future Loans with any Mortgage Company In any future mortgage application, you will have to answer “NO” to the question “Have you had property foreclosed upon or given title or deed in lieu thereof of in the last 7 years?” There is no similar declaration or question regarding a short sale. Any future mortgage application, you will have to answer “YES” to the question “Have you had property foreclosed upon or given title or deed in lieu thereof of in the last 7 years?” This will affect future mortgage rates.
Credit Score Only late payments will show on your credit report. After a short sale, mortgage is normally reported as “paid as agreed”, “paid as negotiated”, or “settled”. This can lower the score as little as 50 points if all other payments are being made. A short sale’s effect can be as brief as 12 to 18 months. Your score may be lowered anywhere from 250 to 300 points. Typically will affect your credit score for over 3 years.
Credit History A short sale is not reported on a credit history. There is no specific reporting item for “Short Sale.” The loan is typically reported as “pain in full, settled.” A foreclosure will remain as a public record permanently and on your credit history for 10 years or more. 
Security Clearance On its own, a short sale does not challenge most security clearances. Foreclosure is the most challenging issue against a security clearance outside of a serious misdemeanor or felony conviction. If a client has a foreclosure and is a police officer, in the military, in the CIA, or in any other position that requires a security clearance, in almost all cases clearance will be revoked and the position will be terminated.
Current Employment A short sale is not reported on a credit report and therefore is not a challenge to current employment. Most employers have the right and are actively checking the credit reports of all employees who are in sensitive positions. In many cases, a foreclosure is reason for immediate reassignment or termination.
Future Employment A short sale is not reported on a credit report and is therefore not a challenge to future employment. Many employers are requiring credit checks on all job applicants. A foreclosure is one of the most detrimental credit items an applicant can have and in most cases will challenge future employment.
Moving Expenses You may be eligible to receive up to $3,000 for a successful closed short sale for moving expenses under the HAFA program. You will receive nothing from your lender if your property is foreclosed upon.

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