When is a Short Sale Not a Short Sale?

True story…Seller is an elderly widow.  Her husband became quite ill and they spent every penny of their savings trying to return him to health. After his death she did the best she could to hang on and make things work. She rented out all the extra bedrooms, turned the thermostat down, and crimped on every expenditure. It was a slowly losing battle and finally she just could not do it any longer. She put the house on the market as a short sale.

The house was listed at $229K, she owed a little over $300K to the bank.  Her home had lots of delayed maintenance but was in a good area of Santa Rosa and was basically sound construction.  7 days and 19 offers later, she accepted an offer for $345K curing her short sale and paying all her expenses related to the sale.  She also side-stepped a potential credit issue.

If you haven’t taken a look lately, there is a huge demand for homes in the $500s and below, but very little on the market.  The offers are aggressive…cash, as is, no appraisal and a fast close.  This could be your chance to cure your financial situation and get out from under your mortgage.

Less than two miles from that house and within the last 3 months this happened…

  • 429 Bosley (South of A neighborhood), an early 1900s bungalow listed for $229K as a short sale got 33 offers and finished up in contract at $329K.
  • 521 Hendley (Burbank Gardens), listed at $249K, in contract in one day, closed in 27 days at $255K.
  • 410 Brown (Burbank Gardens), listed at $249K, it had a price increase to $289K within 3 days because of the intense interest. Went into contract in 7 days with multiple offers.

Call me and I can tell give you an idea of the market value of your home.  Good decisions require good information.


Foreclosure Timeline

In California the Notice of Default is usually recorded after the Homeowner misses 3 payments. From that point it takes about 120 days to the point where the house is offered for sale at public auction.

Prior to auction, if the house is still occupied, there will be an eviction overseen by the County sheriff. During the eviction the locks will be drilled out and replaced by new ones and in a day or two people will show up to clean out any possessions left behind.

Start reviewing your options as soon as possible. Lender and government loan modification programs are your first stop. But, be aware, even though you may be in the process of getting your loan modified in many cases, it will not stop the foreclosure process from moving ahead.  You’re still up against that 120 day time line.

So, it’s important that you fight on more than one front.  Get a handle on all of your options by consulting three professionals; a CDPE (Certified Distressed Property Expert), like myself, your tax-preparer, and an attorney to discuss what is best for you in the long run.

If you don’t know where to turn for tax advice, or legal advice about bankruptcy, deed in lieu, etc., go to my Resources page where you’ll find the name and contact info for reputable Sonoma County professionals.

Don’t let the stress immobilize you!  There are options other than waiting for the Sheriff to knock on your door.  There is a dignified way to work through this.  I can help you, so don’t hesitate to call me.

Foreclosure should be avoided if at all possible.  Not only is it stressful to you and your family, it also may represent the longest road back to stability.

Foreclosures stay on your credit report for 7 years normally–that’s almost half the time a child spends growing up at home.  You owe it to yourself to get this information.

Where Do You Begin?

Like a lot of difficult things in life, the first step is the hardest.

When you’ve come to the inescapable conclusion that there is just no way to keep up with your mortgage payments and that the longer you put off finding out what your options are, the worst things will be and the fewer avenues you will have open, you’re ready to do something, but what?

As a CDPE (Certified Distressed Property Expert), I know where to start and how to proceed and that is one of the biggest advantages I bring to the table on your behalf.   Everyone’s time frame is different and my approach will be different depending on how much time you have.

 CDPEs enjoy a 80% rate of success in Short Sales.

I’d like to see everyone exploring their options the day after they miss the first payment. Sadly, this hardly ever happens because we go into denial over our circumstances.  It’s a common human reaction, but don’t let it stop you from taking a step forward. Really, there should be no foreclosures hitting the market before a loan modification, and if that did not work, a Short Sale was attempted.

Unfortunately we see foreclosures hit the market every day where the home owner gave up because they just didn’t know there was any other way.

Picture a large flow chart with your house at the beginning.  On this chart there are connecting “routes” to the best outcome for you.  What route is taken depends on the amount of time you have, the number of lenders to negotiate with, and even the condition of the property.

The foremost goal is to save your home.  If that can’t be done, then to save your credit by Short Selling  your home.  So, where do you start?  By getting in touch with me by email or phone.  Let’s talk about what you are facing and what options are open to you.

Yes, I do short sales, but what I am after first is the best solution for YOU. I layout the options you may have after the facts of you particular situation are evaluated: loan modification, re-finance, non-profit services, federal programs,…  A short sale is one solution, but you may find a better one.

Foreclosures last approximately 7 years on  credit ratings.  For most families that is almost half the number of years their children live at home with them.


Why Would a Bank Accept a Short Sale?

Why Would a Bank Accept a Short Sale?

The easiest way to demonstrate why a bank will negotiate a short sale is to break down the costs of a foreclosure on a hypothetical property, one a short sale and the other a foreclosure.

The average cost of processing a foreclosure is between $40,000 & $50,000 for the bank before they ever bring the house to the market and pay the additional costs listed here.  That is why banks are moving increasingly towards Short Sales.

Say the property has a current value of $200K and the owner owes the bank $225K. But, the best offer to come in is for $190K.  The bank would be foolish to accept it, won’t they?  Maybe not.  Let’s go through the numbers.

Short Sale:

Market Value $200,000
Loan amount $225,000
Sale Price $190,000
Closing Costs @ 2.25%    -$4,275
Commissions @ 6%  -$11,400
Proceeds from sale $175,325
Loan Amount  $225,000
Less Proceeds -$175,325
Short Sale Lender Loss    $49,675
Loss Percentage      22.07%

Foreclosure on the Same Property:  

Market Value $200,000
Loan Amount $225,000
Sale Price $175,000
Legal Fees    -$7,000
Taxes       -$500
Insurance    -$1,000
6 Months Utilities       -$400
6 Months Maintenance       -$800
6 Months Interest Loss    -$6,650
Association Dues    -$1,200
Staffing Costs (Servicing Dept.)    -$2,000
Closing Costs @ 2.25%    -$4,275
Commissions @ 6%  -$11,400
Proceeds from sale $139,775
Loan Amount  $225,000
Less Proceeds -$139,775
Foreclosure Lender Loss   $85,225
Loss Percentage     37.87%

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