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Avoid Foreclosure - The Best Option for Underwater homes
See the graph below: The market conditions are prime to short sale you home in San Diego. We can make a good case that the value of your property has declined significantly even in the last year, so doing a short sale is actually getting easier. There are some banks that easier to work with than others, please give a call to find out who.
If you need to short sale in California, things just got a hole lot easier. All lenders that agree to accept a short payoff (short sale) must agree to record the sale as payment made in full of the loan amount. This is really good news for all California homeowners that may need to short sale there home. Troubled Property Solutions has been helping home owners with the short sale process since 2007, we offer a very discrete and private solution. Lender have started to really wake up to the fact that they need to move forward with short sales.
Under previous law (SB 931 of 2010), a first mortgage holder could accept an agreed-upon short sale payment as full payment for the outstanding balance of the loan, but unfortunately, the rule did not apply to junior lien holders. SB 458 extends the protections of SB 931 to junior liens.
“The signing of this bill is a victory for California homeowners who have been forced to short sell their home only to find that the lender will pursue them after the short sale closes, and demand an additional payment to subsidize the difference,” said C.A.R. President Beth L. Peerce. “SB 458 brings closure and certainty to the short sale process and ensures that once a lender has agreed to accept a short sale payment on a property, all lienholders – those in first position and in junior positions – will consider the outstanding balance as paid in full and the homeowner will not be held responsible for any additional payments on the property.”
SB 458 contains an urgency clause making it effective upon signing.
This should help with the Short Sales.
There are a few different ways to go about purchasing a home. Generally, homeowners have to take out a home mortgage to buy a home, and that mortgage has to be repaid in monthly or regular payments. If the homeowner ends up not being able to repay the mortgage with those payments, the home can be seized.
In 2007 the real estate market suffered a huge crash. This resulted in many homeowners being unable to keep up with their mortgage payments. This in turn causes foreclosures.
A main reason for so many defaulted payments was because when borrowers were having a hard time making payments they had very slim changes of being able to repay it. The only option was refinancing the home with a lower interest rate, which many mortgage lenders were not willing to do because of so many foreclosed homes.
Since the real estate market was in an up market before the crash, homeowners ran in to trouble keeping up with paying the mortgage bill. They couldn’t just sell the home and purchase a more modest one. That was no longer an option, since there was no profit to be gained in selling a home in a down market.
As home prices decreased, interest rates increased. It increased so much that foreclosures continued to happen at a high pace. Homeowners were kicked out of their home, and then the institution that lent the money in the mortgage would auction the home themselves. The home would still go at the lower price, however. The large amount of foreclosures caused the government to step in.
This is where short sales come in to play. A short sale is when someone sells a home at a price that is much lower than what the homeowner originally bought the home for. The original homeowner’s pending mortgage payment was much higher than what the selling price was going for, but the lenders accepted the initial price to avoid expensive foreclosures and long repayment options.
Short sales are most often considered the better option for a homeowner. While there are still negative outcomes of short sales, the negative aspects are generally considered a much better option than a foreclosure.
For example, after a foreclosure if a homeowner wants to get a new mortgage loan they need to wait nearly five years typically before they can qualify. Short sales, however, usually take around two years. Also, because of the Making Home Affordable (MHA) Program, short sale owners get an allowance of ,500 for relocation expenses, and are usually exempted from any taxes on the forgiven amount of the real estate sale.
Temecula Valley short sales are most often mistaken as foreclosures or reside in that unknown area between knowing and understanding for quite a few agents, homebuyers, and homeowners. To begin this post I am going to provide a definition of what a short sale is:
Definition – A short sale is when the total loan or debt burdens on a real estate property are greater than the overall total value of the home as measured by the direct market comparables.
A lot of people think foreclosures and short sales as the same thing but they are actually very different. Foreclosures are when loan payments are not being made and consequently the bank sends out a Notice of Default. The notice is the first step of the financial institute’s foundation for a foreclosure process. Foreclosures usually take between 4-6 months with the owner of the home losing possession and taking a tough credit hit.
However, this circumstance can often be worked out in that 4-6 month time period. This is often why there has been confusion separating the two since they are frequently intertwined. Once a financial institution has started a foreclosure process, the current homeowner has a limited time to either bring the payments current or leave the property.
The other way to go is a short sale if the banks agree and thereby mortgage forgiveness. When taking this route, the seller lists the Temecula or Murrieta house, makes an deal with the bank or banks and sells the encumbered property before the complete foreclosure process. The financial agreement the homeowner makes with the banks is for the financial lien holder to take a smaller amount than is owed on the property but grant full debt forgiveness for the owner.
Now, why would a bank take less money that is owed? Because, that is all they are going to if they foreclose. The banks often receive more money via a short sale since the homeowner is maintaining the Murrieta or Temecula property and it sells for a higher price. The financial institute also sidesteps the expensive foreclosure process while worrying about one less property in its portfolio. Financial institutions have a tough challenge monitoring all their properties. And, homes that have been foreclosed on often get abused and vandalized losing the lending company even more money.
So in quite a few cases the short sale a solution that works out for the current owner of the home who gets debt forgiveness versus a foreclosure and the financial institute who usually takes less of a loss financially. It also often works for the new home buyer as well because they get a home that is in nice shape many times at or below foreclosure pricing.
It isn’t always a walk in the park though and there are two issues to short sales. The first hurdle is time. Financial institutes often take a long time to the file in order and submit it to a closer and unfortunately a lot of buyers will not wait. As an buyer’s advocate, it is much easier for me to sell a banked owned home or a traditional seller owned home over a short sale.
The second worry is possible tax liability. In the event a bank grant debt forgiveness it is obligatged to report that financial forgiveness as income via a 1099 IRS form. What most of sellers won’t check into is the real situation of their taxes.
Many homesellers are thought of as financially destitute and are thereby relieved of these tax burdens. Sellers in this circumstance need to have a CPA calculate their net worth utilizing the proper IRS form and very well could be pleasantly relieved.
Wrapping up, there is some good news on the horizon. The House of Representatives just overwhelmingly passed a recent bill to reduce the tax negatives on bank forgiven debt. This action further augments the benefits of a short sale over a foreclosure and really reducing the long term financial shock for someone caught in what has become a very normal situation.
“A Wells Fargo short sale is a way for troubled borrowers to avoid losing their homes in a foreclosure. In a short sale, the bank agrees to accept less than the amount owed on a borrower’s mortgage, allowing him or her to sell off the home at a discount. Often, this makes more sense to Wells Fargo than foreclosing, as they tend to lose less in the process.
Banks have been put on the spot for being less than efficient in helping consumers, but the Wells Fargo short sale is known to be among the fastest in the industry. In fact, one can complete a short sale with the bank in as little as two months, instead of the six or more it usually takes with other lenders. If you’re considering a Wells Fargo short sale, here’s a simple guide to help you get started.
Prepare Your Hardship Letter
Wells Fargo short sale officials put a lot of weight on the borrower’s hardshipa”they want to know that your only option is a short sale and you’re not just taking advantage of market conditions. Your hardship letter should explain in detail how you fell behind, and how a Wells Fargo short sale can help you. Make sure you’re able to back it up with the right documentation, such as dismissal slips, medical bills, or divorce papers.
Find A Good Agent.
You need to list your home with a qualified real estate agent before applying for a Wells Fargo short sale. The listing agreement is one of the main requirements in the short sale package. Find an agent who has specific experience in short sales, particularly with Wells Fargo, as they’ll be more familiar with the
system and in-house policies.
Check Your Home’s Value.
Wells Fargo recommends short sales for people who cannot or do not want to stay in their homes, and whose homes have depreciated. Your agent can draw up a comparative market analysis of similar homes to give you a basis of comparison, which you can use to help your Wells Fargo short sale case. The bank is more willing to work with borrowers who have underwater mortgages than those who still qualify for other alternatives.
Market Your Home.
Like other major banks, Wells Fargo has tightened its rules in closing deadlines. You have to complete your Wells Fargo short sale before the date set in the agreement; otherwise the bank will choose to foreclose. Try to get your Wells Fargo short sale home viewed by as many buyers as possible, and work with your agent to negotiate with buyers for the best possible deals.”
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