Short sale facts, a short sale can save you from foreclosure!

Below are the most common questions that have been asked by our Santa Clarita short sale clients. If you are speaking with other Realtors and they cant answer the questions below, you know you have come to the right place. We found it beneficial to make sure our clients know what is going to happen throughout the process.

What is a Short Sale?

A short sale in real estate is selling a property for less than is owed on the property. For example:

Loan Amount: $550,000,

Market Value of Real Estate: $375,000

In the above example the property is at a minimum upside down $175,000. In order to get your lender to take a FAIR MARKET VALUE offer at $375,000 you will need a team of experts who specialize in negotiations with the lenders servicing entities, i.e., Fannie Mae, Freddie Mac and the US Treasury. That is exactly the expertise of Jennifer & Gary Ricco at RE/MAX of Santa Clarita.

How long are short sales taking?

With the implementation of the Making Homes Affordable Programs by the big bank short sale timelines are getting better. Those homeowners qualifying for streamline short sales are seeing approvals with 45 days, while others still take months to negotiate. Sellers are currently seeing a 30 to 45 day escrow period to close, once an official approval letter is received.

If the short sale is approved when do you have to move out?

Once the short sale is officially approved you will have 32 to 47 days to move out. We always ask that our sellers have two days after escrow closes for moving, before the keys get turned over to the buyer. Example, 30 day escrow +2 = 32 a 45 day escrow +2 = 47.

What are the benefits of doing a short sale?

A successful short sale will have less of an impact on whats reported to the credit bureaus. The government programs are requiring lenders to report a short sale to the credit bureaus in the following manner, Paid or closed account/zero balance or account paid in full a foreclosure was started. The benefit of avoiding a foreclosure means that on future lending applications where it asks if you have had a property foreclosed upon you will be able to answer no.

The Making Homes Affordable HAFA program also offers up to $3000 in relocation assistance

What kind of paperwork will the bank ask for?

Each bank or servicer has their own separate set of forms that they will ask to be filled out. In fact if you have two loans with different lenders the forms will most likely be different between both banks.

The types of information that can be asked for as follows:

  • Signed hardship letter
  • Copies of last several paychecks for all owners of the property
  • Copies of P&L statements if you are self employed
  • Complete financial form each bank has their own standard
  • Copy of tax returns
  • Copy of bank statements
  • Copy of investment account statements
  • Copy of listing agreement
  • Estimated net sheet
  • Identification of liens on property

Our team will guide you through all of the requirements regardless of which bank and which form that is required.

What needs to be in a hardship letter?

The hardship letter contains a statement of how your family got behind on your payments.
These are the type of financial difficulties that should be included in a hardship letter:
  • Loss of Job.
  • Loss of overtime or income from a job.
  • Family issues pending divorce, medical bills, other family issues.
This is one of the main pieces of information that the bank uses in order to make its decisions off of. It is important that it is truthful and explains what happened to the fullest extent possible.

Should you declare bankruptcy?

Bankruptcy will delay a sale of your home from a trust sale, however without quick action the home can be removed for the bankruptcy and foreclosed upon. A bankruptcy attorney will have advice for you should you qualify for a bankruptcy. Jennifer & Gary Ricco is proficient at communicating with your legal representation.

How do you choose someone to represent me on a short sale?

The short sale specialist you select needs to have the expertise and training necessary in order to complete a short sale transaction. Jennifer and Gary are Advanced Certified Distressed Property Experts and Certified Pre Foreclosure Specialists. The team should be experienced and conducting the loss mitigation negotiations. Be cautious of Realtors using third party negotiators. The short sale specialist should be able to tell you up front if they can help you and what they are going to be doing for you.

Shouldn't you call your local Realtor who markets in the area?

Unfortunately up to 70% of real estate professionals are not trained on how to handle a property where more is owed than the property is worth. Many are still being trained on negotiations and trained on how to deal with lenders/investors and the banks servicing representatives.

The Agent you choose needs to have specialized training in order to complete this process. In addition agents need to have a deep understanding of the foreclosure process and be able to explain to the bank why the short sale will limit their loss severity. Jennifer and Gary Ricco have sought out and received the training to enable them to negotiate short sales in Santa Clarita, Los Angeles, Ventura and Orange Counties.

We provide contact numbers to the most recent clients we saved from foreclosure, for your reference.

How do you know what type of short sale you qualify for?

We won't know until we contact the bank servicing your mortgage. Each homeowners financial situation/hardship is unique and will be reviewed for the existing government programs such as HAMP, HARP, HAFA and FHA short sales. Any Realtor who has helped sellers of short sale properties will tell you that not all short sales are created equal.

What do Short Sale Realtors?

  • Negotiate with uncooperative banks.
  • Prevent inadequate disclosure by the seller.
  • Screen poorly prepared buyer by having buyer pre qualify with preferred lender.
  • Manage banks delays.
  • Positive communication and present correct paper work to bank.
  • Pre plan, if buyers back out manage backup offers.
  • Motivate seller and manage expectations throughout the process.

Will you pay taxes on the difference between the sale price and what you owe?

The majority of banks will send you a 1099 for the difference. The difference or shortage may be forgiven under the Mortgage Debt Relief Act, HR3648. We recommend you contact your tax accountant for assistance to verify if you qualify.

Shouldn't you just let the home go to foreclosure?

To manage the damage to your credit history and shorten the recovery period! Foreclosure has the biggest impact on your credit history. You will have to disclose the fact that you had a foreclosure every time you apply for credit. All loan applications ask if you've had a foreclosure, so expect higher interests rates for at least 5 to 7 years.

Why is having a short sale specialist working for you important?

You don't go to a knee doctor for heart surgery, you go to a specialist. Jennifer & Gary Ricco obtained their Advanced Certified Distressed Property Experts designation in 2008. Our administrative personal, i.e., escrow and title company are trained to handle all aspects of short sales.

Most importantly, Jennifer and Gary negotiate your file personally, we do not use third party negotiators. This gives us intimate knowledge and control over the negotiation process.

Who pays the Realtors commission and closing costs?

The bank does, they assume escrow closing costs which includes commissions earned for the listing and selling agents. The homeowner has no out of pocket expense.

What if we have a 1st and 2nd Mortgage?

Having two different lenders is one of the hardest short sales that can be done.The governments HAFA program has made this process better should you qualify for HAFA. If its a traditional short sale, the experienced Realtors negotiation skills will determine what each bank will accept to approve the transaction. It Really depends how both Banks been communicated with during the entire process.

Will you have to communication with the bank?

It's possible but usually not without us! We stop this from happening because we do the communication for you. We will be authorized to speak to your lender on your behalf. We take care of the communication and make sure you stay informed of what is happening. There may be times when we will need you to communicate with us to your banks to help the process, however we will do the bulk of communication.

How do we keep our clients informed throughout the process?

The Ricco Sells Homes Team has a system in place to communicate with you at a minimum of once every week on Fridays via phone and twice a week during escrow. You also will receive e-mail communication as required from our team. Our Marketing systems provide you with weekly reports so you an see how many potential buyers are viewing your property.

What is a deficiency judgment?

Speak to your CPA about how purchase money loans (non-recourse loan) and non purchase money loans (recourse loan) enabling the lender to pursue a deficiency judgment. To read more go to: http://banking.about.com/od/loans/a/recourseloan.htm.

Can you do the short sale yourself?

No, this is a complicated real estate transaction with a large lending institution that requires a licensed Realtor to handle the transaction. This process can take 100's of hours for a trained professional to complete.

What is HAFA and can it help you Avoid Foreclosure?

Here is latest information and updates on the HAFA Program. You can also our Santa Clarita Pre Foreclosure Specialists website. Here you will find more information about Short Sales, loan modification and avoiding foreclosure.

This video is from Making Homes Affordable, its a summary of the government options available for struggling homes owners.

Many of our Santa Clarita clients have already attempted and been denied a (MHA) HAMP modification from their mortgage servicer. If you're one the next option to consider is the the Home Affordable Foreclosure Alternatives (HAFA) Program Which offers homeowners, their mortgage servicers, and investors an incentive for completing a short sale or deed-in-lieu of foreclosure.

These options are available for homeowners that:

  • Do not qualify for a trial mortgage modification under the Making Home Affordable Program.
  • Do not successfully complete the trial period for their modification.
  • Miss at least two consecutive payments during their modification period.
  • Request a short sale or deed-in-lieu of foreclosure.


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