Some Orange County CA home owners have financial challenges, are no longer able to make mortgage payments, or have current market value of the property less than what is owed on loans secured by the property – and are facing foreclosure.
Distressed Orange County CA property owners in this situation should consider doing a SHORT SALE and listing the property for sale with an experienced agent.
SHORT SALE could save the lender/lienholder the expense of a foreclosure and from having another REO property on its books.
From the owner/borrower’s perspective, a SHORT SALE would prevent the foreclosure from being placed on your credit history, and if negotiated correctly can release the owner/borrower from further money obligation on the loan.
A SHORT SALE is essentially a sale transaction subject to lender/lienholder’s approval where the lender consents to a sale of the security interest for less than what is owed on the note and accepts the proceeds in satisfaction of the loan amount.
Deficiency in Short Sale ~ In a short sale, there will usually be a difference between the mortgage amount owed and what the lender collects, which is the “shortage” or “deficiency”. This deficiency might be negotiable. Some lenders will ask for promissory note for the deficiency, which means the seller would be responsible to pay the difference between what the home sold for and what is owed to the lender. Other lenders might choose to file a collection or lawsuit for separate money judgment for what is owed. The seller should make sure that any amount of debt – “deficiency” – or release from debt, is confirmed by lender in writing.
Debt Forgiveness ~ If the deficiency is forgiven, the lender can write off the shortage as a loss and inform the IRS. The seller might be receive a 1099 and be responsible for paying taxes on the amount of the debt foregiveness. However, the U.S. Mortgage Debt Relief Act of 2007 generally allows taxpayers the potential for relief from tax on mortgage debt forgiveness.
SHORT SALE ~ requires lots of paperwork and preparation by the owner/seller/borrower. Before applying to the lender for a short sale, the owner/seller should have all the paperwork (short sale application) prepared to present to the lender.
Short Sale buyers must be patient about time needed to conclude the property purchase.
Thanks for contacting us about homes and properties at Orange County, California, and we are here to help you.
By Harrison K. Long – Professional real estate representative, REALTOR and broker associate, HomeSmart Evergreen Realty – 949-701-2515 (phone) – ExploreProperties@gmail.com – CALBRE #01410855 – Now serving as an appointed director at the California Association of Realtors – also an attorney member of the California State Bar association #69137
This is for information only and not the providing of legal or tax services. You should consult with an experienced REALTOR and a real estate lawyer before making final decisions about short selling your property.