If you are considering a short sale of your house, Huggins Homes is here to help. Huggins Homes is Ventura County’s premiere choice when it comes to short sale negotiations!
Huggins Homes specializes in helping our neighbors in Ventura County and adjacent portions of Los Angeles County. Short sales are a complicated process and no two short sales are the same. That is why we custom tailor our approach to your specific needs and are here for you each and every step of the way!
A short sale is defined as:
When the lender agrees to let you sell your home for less than the outstanding mortgage debt. The proceeds from the sale pay off a portion of the mortgage balance and the lender releases the lien on the property.
In general, to be eligible for a short sale:
If you owe more on your house than it's worth and can still may your payments, there is another option for you. This option is called a "Short Payoff" and it is identical to a short sale with the exception that you can still make your payments and are not suffering a financial hardship.
A short payoff is typically done when someone needs to relocate for work or to be closer to family and can't wait for the market to recover to a point where the value of the home is worth what is owed on it. Another common reason for someone to do a short payoff is when they simply no longer want the mental burden and emotional stress of having a home that is worth less than they owe.
A shortage is simply the difference between what is owed on the house and what you can sell it for. For example, if you bought a house for $800,000 and you can only sell it for $750,000, the difference/shortage is $50,000.
Sometimes the former homeowner agrees upfront to pay back some of the shortage in a promissory note with a down payment or through a payment plan. Other times, the lender will agree to waive the shortage as part of the short sale agreement. However, if the agreement does not contain a waiver, there are many states that allow a lender to seek a personal judgment against the borrower after the short sale to recover the shortage amount.
While many states have passed laws that prohibit a shortage judgment following a foreclosure, most states do not have similar laws that protect the borrower from a shortage judgment following a short sale. Both California and Nevada have laws that prevent creditors from seeking judgments against the borrower in certain circumstances.
Of course, the best protection against a judgment is to negotiate a waiver of the shortage during the short sale process, or if that is not possible, at least a reduction in the amount owed. Getting this resolved during negotiations is a high priority item so that there are no surprises after the sale is completed.
The simple answer is "maybe." If your lender forgives all or a portion of the shortage on a short sale, you may owe taxes on the amount that was forgiven. The IRS generally considers any debt forgiven as a form of income. This actually makes sense if you think about it like this: you borrowed $100 from a friend last week. This week you have the money available and go to pay the friend back, but instead of accepting the money, your friend says not to worry about it. Now you have an extra $100 you weren't planning on having that you can now use for other things, like taking your friend out to a nice dinner. While that may not meet most people's idea of income, which is normally considered a payment derived from work, the IRS does see it as income and it may be taxed. On the bright side, under the Federal Mortgage Forgiveness Debt Relief Act of 2007, there are some exceptions that your tax professional can advise you on.
At Huggins Homes, we have over 30 years of real estate sales experience to get you the highest value for your home. We can also advise you on various ways to maximize your home's value and desirability. This helps you get the most money in the quickest time, which helps you reduce the short sale shortage. Smaller shortages have a better chance of being negotiated down or away than larger ones.
At Huggins Homes, we never charge you any up-front fees. Our services are paid for just like in a traditional real estate sale, with a commission, the only caveat is that the banks will set the maximum amount of the commission. Unlike other firms, Huggins Homes never has and never will charge our clients hidden fees, such as technology or document storage fees. This helps to keep your costs low and your net high.
We were around during the recession of the 90s and the associated real estate downturn and were involved in a considerable amount of short sales. After the "Bubble Burst" of 2008 and the recession and depression that followed many of the people at the banks had forgotten how to do short sales or were so new they had never done one. We trained the staff at several banks on how to complete short sales. Needless to say, we are very familiar with the process. Contact us today to schedule your free in-home consultation to discuss your situation and your needs.