Top 10 Short Sale Tips For Homeowners Desiring to Short Sell Their Homes.
1. Decision to Short Sell: Prior to seeking the advice of a Realtor make sure that a short sale is what you really want to do. You should exhaust all of your options by consulting someone that is knowledgeable and understanding of your specific situation. To view more information regarding options available to distressed homeowners you may visit the following website: www.californialoanmodificationattorney.com. If your house is severely underwater and the thought of keeping a property valued significantly below what you owe is not palatable and your lender will not consider a principal reduction then your decision should be relatively simple. If you have received a loan modification the general rule of thumb is: If your lender does not cut your principal balance and you are still significantly underwater post-modification, then the lender should provide you with a modified payment equal to or less than you could pay for rent. If your lender does not provide you with a payment equal to or less than rent and you are still significantly underwater, then you should consider exploring short sale options. Regardless, the point is that you need to be at peace with your decision to short sell.
2. Choose the Right Realtor: Not all Realtors are created the same. Some Realtors are more qualified to handle and process short sales than others. Of course they will all tell you that they are extremely qualified and that they have closed hundreds of short sales and that they have successfully closed 99% of their short sales, etc. Realtors have to say this because a large portion of the real estate market is short sales. If they did not convince you that they are qualified they would not have any work. The key is too research and find someone capable of handling any of the myriad of issues that might occur during a short sale. Traditional Real Estate transactions are complex legal transactions. Short sales possess the same complexity of a traditional sale but have the added difficulty of dealing with lenders and obtaining short sale approvals. Short sales can become even more complicated if there are issues with the HOA, judgment liens, uncooperative junior lien-holders, substantial deferred maintenance on the house, etc. To read an article about how to select the right short sale realtor please click the following link: http://sdshortsaleattorney.com/how-do-i-find-a-realtor-for-a-short-sale/
3. Research Tax Consequences: Short sales can carry potential tax consequences to the Seller. The short sale documentation and disclosures that you sign during the course of the short sale transaction advise of you of this and state that you should consult with a CPA and/or tax attorney prior to completing the short sale. Most Realtors will gloss over this issue. If your property is in the State of California and you have a purchase money loan (the same loans you purchased the property with) you should be insulated from debt forgiveness tax. However, as a homeowner it is up to you to do your due diligence and determine if completing a short sale will cause you to incur tax liability in the form of debt forgiveness or capital gains. Currently, if you meet the criteria set forth by the Mortgage Debt Relief Act of 2007 (currently set to expire on December 31, 2013) or if you meet the criteria for the insolvency clause you might be able to exclude tax liability incurred for debt forgiveness. You might want to begin your research by visiting the following IRS link: http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation
4. Beware of Stalling: Many homeowners decide that if they are going to lose their home they might as well try and stall the process and stay in their house as long as they can without paying. While on the surface this might seem like a good idea you need to keep in mind 2 things. First, if you are potentially covered from tax liability under the Mortgage Debt Relief Act of 2007 it is important to remember that it is set to expire on December 31, 2013. While it is possible that it might get extended again for 2014 there is no guarantee. If you stall your short sale too much you might find yourself in a very stressful situation come December 2013. Last December homeowners with short sales set to close in December were literally on the edge of their seats waiting to hear if Congress was going to extend the Mortgage Debt Relief Act for 2013. When January 1st of 2013 came around and there was no word that it was going to be extended homeowners whose short sale closings were delayed into January faced the very real possibility that they might be faced with substantial tax liability that they would not have incurred if their short sale closed just a few days earlier. Do not put yourself into that position. Second, FHA rules currently allow for a homeowner to qualify for a new purchase loan three (3) years from the end of a short sale. Delaying the short sale process will only push back the earliest date that you might be eligible to buy a house again at market rate. Keep in mind that the short sale process in and of itself will take three (3) to six (6) months to complete from beginning to end. Delaying or stalling the process could lead to negative consequences. For a more comprehensive article on the short sale timeline please click the following link: http://sdshortsaleattorney.com/short-sale-timeline-how-long-does-a-short-sale-take-to-complete/
5. Relocation Assistance: Many lenders now offer relocation assistance programs to homeowners desiring to short sell their property. However, not all lenders offer relocation assistance. Relocation assistance is determined by the investor on the loan which might be different from the lender. In other words, if ten (10) people owning homes on the same block all have Bank of America as a lender and want to short sell their home, it is possible that some of the homeowners will receive relocation assistance and some will not due to the fact that not all ten (10) borrowers have the same investor. People frequently get confused by this and say things like, “Well my neighbor got relocation assistance so I should as well” or “My neighbor got $5000 in relocation assistance and that is what I want”. The problem is that your neighbor might have a different lender, a different investor, even if the same investor it might belong to a different investment pool with different guidelines, a different financial situation, a different risk of loss to the investor, etc. No two individual situations are 100% alike. Many homeowners become frustrated by all of this. All of this is another reason to select a Realtor that really knows about the ins and outs of short sales. The bottom line is that you need to make sure that your realtor knows how to try and obtain relocation assistance for you. If the Realtor you select does not know what he/she is doing you might lose eligibility. In order to receive relocation assistance at most banks they require that you follow their rules and procedures. If your Realtor violates those rules you could be out of luck.
6. Short Sale Negotiators: If your Realtor wants to charge you or the buyer a fee for negotiating the short sale or wants to use a 3rd party short sale negotiator you should pick another Realtor. First of all, a short sale should pretty much no cost you anything. If someone ask you to pay to provide this service look for another Realtor to assist you. Likewise, placing the burden of paying for a 3rd party negotiator on the buyer is not only unnecessary but it will also restrict the pool of buyers willing to put an offer on your house. There are too many listings that do not require this and the buyers will typically move on to those properties. If you would like a free consultation with a Realtor that will not charge you or the buyer to conduct a short sale please visit www.sdshortsaleattorney.com.
7. Stay Away From Low-Ball Offers: In order to short sell your house your lender will need to provide you with short sale approval. Lenders are looking to get fair market value (“FMV”) or close to it. If your Realtor obtains an offer that does not sound reasonable you need to be cautious about accepting it. You would be better served by continuing to market the property and gradually decreasing the listing price until an acceptable offer as close to FMV as possible is procured. Investors are notorious at trying to submit ridiculously low offers in order to try and get the bank to bite off. Sometimes they will ask your Realtor to represent them as well as you in hopes that the Realtor will be more willing to push their low offer. You might be told that you have nothing to lose by accepting the low ball offer. However, if the lender takes 2-3 months to review the offer and then counters the buyer and the buyer walks, you will have lost 2-3 months that you could have used to find a real buyer. Plus, you might be left facing a foreclosure sale date. It is best to try and find a reasonable offer. With that being said, if the property is in severe need of repair, and after a decent amount of marketing time, during which you gradually reduce the listing price, the only offer you receive is low, then you might be justified in accepting a low offer.
8. Beware of Investors Willing to Rent Back the Property: You might be approached by a Realtor or an Investor tempting you with the proposition of purchasing your property and renting it back to you. Be careful. Most lenders require that all participants in a short sale sign an arms-length transaction form under penalty of perjury stating that the seller will not receive any proceeds or that there are no hidden agreements for the seller to retain possession of the property. Additionally, these investors usually put the carrot of staying in your house in order to control the short sale with their low ball offers. If the bank does not agree to their offer they will typically drop out of the short sale leaving the homeowner with whatever time is left to try and complete the short sale before a foreclosure sale date occurs. Finally, if you do agree to allow an investor to try and purchase the property in hopes of retaining possession make sure that you know the terms of the post-sale rental agreement. You need to know the proposed rent, the term as well as the renewal terms. Remember, investors are not philanthropists, they are in the business of making money. If they are approaching you it is because they think that they can make money at your expense.
9. Homeowner’s Association Dues: If you live in a community that has a homeowner’s association (“HOA”) make sure that you keep current on your monthly HOA dues during the course of the short sale. HOAs are ruthless and they will pursue if you are foreclosed on. Most lenders will not allow past due HOA dues to be paid out of the proceeds of the short sale. That means that you are on the hook to pay them in order to finalize the short sale. If you do not agree to pay them and you are foreclosed on, the HOA could pursue you post-foreclosure. The wise thing to do is to continue making your HOA payments throughout the short sale process or you might jeopardize your short sale.
10. Check for Judgement Liens Other Title Issues: If you believe that there might be title issues such as judgement liens clouding your title it is best to let your Realtor know about this as soon as possible. Clouds on title can be a short sale killer if they are not addressed early enough. Issues such as judgement liens are another reason that you might want to retain a Realtor that has extensive experience in handling short sales. If you have a situation like this it is definitely advisable to retain a Realtor that is also an attorney.
This Top 10 Short Sale Tips For Homeowners website was created by Michael Gaddis, J.D., a Real Estate Broker and licensed California attorney. Michael Gaddis does not charge to help homeowners short sell their home and offers free consultations. To contact Michael Gaddis you may call 888-242-2272 or email Michael Gaddis at firstname.lastname@example.org. To obtain more information regarding short sales please visit www.sdshortsaleattorney.com.