There is still much confusion in the market about Short Sales and the recent bill, H.R. 3648 the President signed into law, The Mortgage Forgiveness Debt Relief Act of 2007 on December 20, 2007.
This is the law that retroactivleyl back to January 1, 2007 eliminates an IRS tax liability for forgiven debt relating to mortgages setteled ‘short'.
Prior to the signing of the bill by President Bush, negotiating with lenders NOT to report the forgiven debt to the IRS was always one of the strongest benefits to pursuing a short sale. Now thqt the governemnt has waved it's majic wand...people want to know more about why they should consider selling their home as a short sale, rather than letting it go to foreclosure. (Of course you need to check with your own tax professional to see how this applies to you.)
Good Question - lets look at the services I strive to provide a Hemet homeowner that is either behind on their mortgage or will be as the payments continue to ecsulate.
Perhaps the strongest motiovation today to complete a succesful negotiation with your lender todday is to avoid a defiicinecy balance. Although we have not yet seen many lenders pursuing the deficinecy they are entitile to if cash was taken out of a home in a refinance, I have a very strong suspecison those days are not far off.
Pulling form my 12 years of Collections experience, I know that deficiency balances get bundeled and sold for pennies on the dollar and at some point there will be investors buying these pools of bad loans. These investors will be relentless at pursuing every legal remedy available to collect these debts.
By succesfully negotiating a short sale now, it is possible for me to have the bank wave their right to pursue a deficieny balance. This means they will not sue you nor assign the right to anyone else. They arevoluntarily agreeing to the decision to accept less than the balance due.
Damage to the Homeowners Credit can be reduced. By the time a Short Sale is initiated, the Good Credit Train has already left the station. Now we have to work at minimizing the impact of the negative credit. After a bankruptcy, about the worst thing that yo can have reported against your credit is a foreclosure.
The negotiation process in a short sale can be very complex. Asking for the mortgage lender to report the account as Paid in Full typically will not happen. However, there is a status, Paid as Agreed (or sometihng similar) that can usually be succesfully negotiatied with the completion of a short sale for your Hemet property.
Paid as Agreed will let other creditiors know that you worked out an acceptable plan and that you made it easy on the creditor and did not make your dificult situation even worse.
A common complaint Hemet Homeowners have when they are losing their home to foreclosure is the Constant Harassment the Bank Collection Departments pursue. Now, you must realize that every bank and mortgage lender is different and unique unto themselves, so there is no set policy that I can recite. However, most banks will lighten up the collection activities once they know you are working through the process.
If you ignore the banks and just allow the entire foreclosure process to continue you can be assured that you will receive some of the most hardcore collection efforts on behalf of your mortgage bank in an attempt to collect any amount of money they can from you. Their hardball tactics may include a barrage of auto-dialer "important message" phone calls; they will contact every reference on your original credit application - including your employer, family and friends; not to mention that they just may show up at your front door at the most awkward of moments.
The bottom line is the more trouble the bank has to go through to collect their money, the more aggressive they will be with you. When I am negotiating a short sale for my clients, I always ask the homeowner to defer all collection calls to my office phone.
Time is of the essence. Once you fall behind on your mortgage, there is stress coming in all directions. Most people just want to move on with their lives and put this chapter behind them.
By cooperating with the bank the short sale process can typically shave up to 6 months off of the process. If you can get me the documents I need for my short sale package to the bank and everyone is cooperative there is so much less stress and the homeowner can move on in dignity.
So if you are a Hemet Homeowner . . .or any where else for that matter, including all of South West Riverside County or anywhere in the Inland Empire in Southern California and you can no longer afford your home...or perhaps you have already fallen behind in your mortgage, then you need to know that the worst thing you can do is to do nothing.
I am not saying that a short sale is your only option, but it is one that can work if handled properly and professionally.
Now Have a Blessed Day,
John Occhi, REALTOR®
Century 21 Crest - CrestREO
CrestREO.Com
Hemet - San Jacinto Valley
951-927-9473
Author of "What You Need to Know...About Foreclosure and How You Can Stop It!" - If you are a Hemet or San Jacinto Homeowner.
This blog and the contents written here is the intellectual property of John Occhi, Hemet California REALTOR®. The views and opinions expressed are just that - views and opinions of John Occhi and those who comment. Please note that I am not an attorney or a tax professional and any time I discuss either topic, I suggest you consult with the proper professional for relevant assistance.
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I am proud to be a full time REALTOR® with Century 21 Crest and the CrestREO Division who is proud t
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