Is Short Sale Your Solution to Delinquest Mortgages?

Is Short Sale your Solution to Delinquent Mortgages?
California Real Estate Market is flooded with Short Sale properties. Appreciation is stalled, and homeowners whose mortgages are adjusting to higher interest rates are worried that they can't keep up.
Foreclosures and short sales are dominating the Real estate listings in California and probably most part of the nation. DataQuick reports that last quarter the number of default notices (NoDs) sent to California homeowners increased to its highest level in nearly 10 years. This flood of delinquencies is causing short sales to become more popular as a solution for homeowners who need to get out of their properties as painlessly as possible.
A short sale is the same as a displacement issue. It's when the homeowner cannot afford to make the payments on his loan due to circumstances like job loss, death in the family, excessive debts, family emergencies, rising interest rates and many more.. But based on what I have seen I believe that most people that went into foreclosures and short sales were due to the “Sub-Prime” mortgages that they cannot afford in the first place that they were lead into.
When homeowners decide that they can no longer stay in the home and have tried all avenues to save their homes we would normally try to suggest for a short sale rather than having the home go through a foreclosure. These days, lenders, wanting to avoid costly foreclosures, are more inclined to accept a short sale in which the loan balance exceeds the market value of the house.
The short sale path ends by agreement with the lender that [the lender] will approve the sale of the property to a buyer and it results to the sellers release of liability in most cases. We will also request for lenders to note the account on the credit report as either “Settled Account” or “Paid in Full for less than the Full Balance”. Which I believe is better than a “Foreclosure” being reported on your credit.
Since homeowners know they will be moving they will need to find a new place to live. You have to find money for that. How are you going to find money for that? Well you're not going to be making payments on your mortgage any more so you would take that windfall and you apply that to the preservation of your family future.
It's also important to understand that you could face a 1099 in the future -- meaning you could be taxed down the road on the sale of your home due to the lender's suffering a loss of principal of $600 or more. I would suggest then for you to consult with your CPA on how to balance the gains that the IRS is supposedly seeing this transaction as. I believe that you CPA will see this as a loss and it then will be a wash. Consult with your CPA for further clarification.
If you property goes to a foreclosure, additional fees will be accumulated and later reported by the lender to the IRS as losses.
The benefits of the short sale are numerous. The homeowner isn't going to be disgruntled and tear the property up; he's going to maintain it for a certain amount of time. The benefits of the short sale are the Realtor is going to receive a commission and you will know when you will have to leave when the escrow closes and not continue to be scared or wondering when the bank will come knocking on your door.
You have to find an experience agent who have done this before, they have to be experience in negotiating, identifying the person to negotiate with the short sale lender and then to dialogue with that lender and compel [the lender] to agree with the short sale. Ask to see documents provided by the banks on previous short sale approval, call for references to see if the previous transactions have been smooth and painless specially for the sellers.
If you are attempting to do a short sale, recognize you'll likely need expert help. The short sale process is not an easy path, even for experts. Guidelines for lenders are constantly changing and now its been more difficult to do short sales specially if you have two different lenders involve in the sale. Key is probably to know who your actual investors are for your loan.
[The loan servicers] have to have some common ground to dialogue with your agent. They often have instructions to not settle for less than a certain amount are given to the loan servicers. That's when the chase begins. Whether intentionally or unintentionally, getting to the right people to discuss the possibility of a short sale, seems to be a challenge to which even the professionals say there is no easy answer.
However, once an agreement is reached, the short sale can be the best opportunity to get out of a very bad situation with the least amount of harm for all involved.
For a free consultation, please call Ken Go at 1st Innovative Finance Group at (562) 508-7048 or write to Kennethgo@verizon.net.