There has never been a time that I have been more proud to be a Realtor.
Hello there. My name is K.C. Soll. I'm a Realtor with Sotheby's Realty (Brentwood, Ca) who has worked in Westside Los Angeles Real Estate for over 35 years. I've sold and/or located hundreds of homes for singles, couples and families from all over the world.
In my experience, our current nose-dive in property values, and the desperation it has generated gives me an ache in the pit of my stomach. I decided to learn how to help those I can by finding out exactly what lenders will/can do (changes weekly if not daily) to help struggling homeowners keep their homes, or at least avoid the lengthy credit demise of foreclosure. In Loan Modification (owner keeps home). This is rare in So California, because few properties meet the criteria. Too much debt to market value.
This is a rudimentary explanation about the difference between short pay-offs and short sales.
A Short Payoff: The lender agrees to release the debt/lien(s) on the property, and allow it to be conveyed (sold) to a new owner. The lender agrees to accept less than the amount owed on the property and to release the lien, however they extend a negotiated amount of credit to the borrower in the form of an unsecured line of credit or promissory note. Said promissory note can have an interest rate as low as 1% or 2%. The borrower should receive no negative feedback, AND, in the event the borrower is unable to pay the note, the ramifications to their credit are significantly smaller.
In a Short Payoff the mortgage is current, the borrower has good credit, the borrower initially QUALIFIED for the loan, and can demonstrate the ability to pay off the debt. Not all lenders allow Short Payoffs, but it's worth a try.
In a Short Sale, the lender or investor agrees to accept an amount less than actually owed on the property, and pays other liens (HOA dues and property taxes). Sometimes there are more than one loan and several liens.
The borrower must be able to verify long-term hardship.
In 2007, the tax laws were changed so that the loan forgiveness may not be taxable (as was previously). Check with your accountant on that. Also, in a short pay, the borrower's credit is tainted for 2 years, however the same borrower may be able to purchase a home as a first-time buyer thereafter. In a foreclosure, the credit is tainted for at least 4 - 7 years.
I hope this explanation was helpful. If you have general questions or would like to have a confidential discussion of how I may guide you through a distress sale on your home, please don't hesitate to call.
Best regards,
K.C. Soll
Sotheby's Realty
310.454.1525
Disclaimer: I'm not an attorney or accountant. If you are having severe financial problems, please call your tax advisor and/or an attorney, for realistic options to foreclosure.
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