San Jose Short Sales

Alan Nguyen, Broker/Owner, Short Sale Specialist

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Alan's Blog

Think Foreclosure is the Only Option?

...Think Again.

Effects of

Foreclosure

A few of the effects of foreclosure are:

Your credit scores will be significantly lowered, sometimes by more than 300 points. This is the single most devastating mark on your credit report and will affect all of your future credit possibilities.

A foreclosure listed on a credit report is nearly impossible to have repaired and will most likely remain a permanent mark on this valuable personal report. Any future application for a mortgage will require you to reveal a previous foreclosure, greatly affecting your mortgage rates.

Most employers will also conduct a credit check. With a huge drop in your credit score due to a foreclosure, this may also hinder your future employment opportunities. This is especially true of many government positions, including military and law enforcement agencies. If your current employer runs a credit check, then a foreclosure may even put your current position in jeopardy.

Lender may seek a deficiency judgment against you to obtain the balance. Depending on your state law, you may be responsible for deficiencies after the foreclosure for an undetermined time period, placing you in a prolonged cycle of continued collections.

A short sale process may be the better way out.

Avoid

Foreclosure

There are many unforeseen hardships can change the joy of owning a home into an incredible burden. Maybe you've lost your job, or have unexpected medical bills, or your monthly mortgage payments have increased beyond your current budget. No matter what the cause of your troubles, ignoring the problem won't help, it will only make it worse. You must act quickly to resolve the issue.

Possible options to discuss with your lender include:

Deed in Lieu of Foreclosure - In this option, your lender may accept the return of the title to your home, but beware that the lender may still sue for loss and report any uncollected funds due to loss to the IRS as taxable income to you. This option may have negative effects on your credit report.

Claim Advance - If you have a private mortgage lender, they will often provide a cash advance to bring your loan payments up to date. Sometimes this money is interest free and may not have to be repaid for years

Re-Amortization - In this option the payments you have missed are added to the balance of the loan, making your account current. Your debt will increase and your monthly payments will be higher unless the lender also agrees to extend the term of the loan

Short Sale - Considered by many one of the best options available to avoid foreclosure, the short sale is an increasingly popular option. In this option, the lender accepts less than what you owe on the property, relieving the homeowner of debt. Lenders are often willing to accept a short sale because it greatly reduces the expense and time involved in foreclosure proceedings. In most cases, a short sale does less damage to your credit than a foreclosure.

What happens in a

Foreclosure?

California Foreclosure Timeline

The following timeline is applicable for non-judicial California Foreclosures under a Deed of Trust. Foreclosures begin with the Trustor (borrower) not making the monthly payments to the Beneficiary (Lender), the first missed payment is technical default, but in practical terms, most Beneficiaries do not begin the process until the third payment is missed. If the Beneficiary cannot resolve the defaulted payment amount with the Trustor through Forbearance or other Loss Mitigation measures, the Beneficiary will instruct the Trustee to begin Foreclosure proceedings.

Day 1: Notice of Default is filed with the county recorder.
10 business days: Mail Notice of Default to borrower address
1 month: Mail Notice of Default to owners
After 3 months: Set Trustee Sale date
20 Days Prior to Sale Date: Publish Notice of Sale, Mail Notice of Sale
14 days before Trustee Sale date: Record Notice of Trustee Sale
5 business days before sale date: Right to Reinstate expires
Sale date: Property is sold to highest third party bidder or reverts to Beneficiary at public auction

Short Sale's

Tax Issue

Did you know that until recently, mortgage debt on a primary residence that was forgiven from a Short Sale or Foreclosure could be counted as "taxable income" by the IRS?

The good news is that on December 20, 2007, the Mortgage Forgiveness Debt Relief Act was signed into law, any forgiven or "cancelled" primary mortgage debt from a principle residence, or debt used to improve the residence, will not be taxable. The Emergency Economic Stabilization Act of 2008 extended the time period through December 2012.

You can find more information on the IRS online filing form titled Reduction of Tax Attributes Due to Discharge of Indebtedness. Be aware, however, that second mortgages and home equity lines are not exempted.

If you own San Jose real estate as an investment property or second home, your cancelled debt will trigger a 1099-C as "income". According to the IRS, there is an exception to tax liabiltiy when the borrower is insolvent, meaning, your total liabilities are greater than your total assets at the time of the debt forgiveness (short sale real estate closing). Many borrowers are insolvent when performing a short sale.

For a detailed explanation of potential tax liability and insolvency, please visit the IRS web page about "Questions and Answers on Home Foreclosure and Debt Cancellation". Consult with your tax account on your particular situation, and after completing a short sale, have your CPA prepare your tax return.

Feature

Can I do a short sale even if I am not at risk of foreclosure?

By Alan Nguyen on May 18, 2012

A. Absolutely Yes. It is up to the bank to make the ultimate decision to agree on the sale and allow the deal to close.
Sellers who are underwater, because they owe more to the bank than their house is worth, or simply won’t net enough from the sale to pay off all the closing expenses, [...]

Posted in Short Sales | Leave a response

Setting The Right Buyer Expectation in a Short Sale

By Alan Nguyen on May 18, 2012

Having success with Short Sales requires setting the right expectations from the beginning; buyers and their agents must have realistic expectations about Short Sales. Setting the right expectations can be the difference between failure and success of the Short Sale transaction. Here’s a good example of an email you can attach to the counter offer.  
This [...]

Posted in Short Sales | Leave a response

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San Jose Short Sales

Welcome to Broker

Alan's Blog

Think Foreclosure is the Only Option?

...Think Again.

Effects of

Foreclosure

Your credit scores will be significantly lowered, sometimes by more than 300 points. This is the single most devastating mark on your credit report and will affect all of your future credit possibilities.

Avoid

Foreclosure

What happens in a

Foreclosure?

Short Sale's

Tax Issue

Feature

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Can I do a short sale even if I am not at risk of foreclosure?

Setting The Right Buyer Expectation in a Short Sale

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