Pasadena Short Sale Guide

Your Pasadena home may now be worth much less than you paid for it several years ago. Perhaps you have an adjustable rate mortgage with an interest rate that almost twice what your new neighbors are paying. Maybe your financial situation hasn’t advanced as you had planned or maybe you have experienced some other financial hardship.

Underwater on Your Home
Are You Underwater on Your Home?

Whatever the reason you need to sell your home and get out from under the burden it has placed on you. Maybe it is time to consider a Short Sale. A Short Sale occurs when the home is sold and the proceeds are not enough to cover the payoff balance of the mortgage.

With distressed property sales (short sales & bank foreclosures) comprising approximately 30% of the Pasadena real estate market, the process for successfully completing a Short Sale has improved tremendously over the last couple of years and is now much more efficient and expeditious.

Short Sale vs Foreclosure

There are major differences between a Short Sale and a Foreclosure or a Deed in Lieu. It is generally agreed that in a majority of situations a Short Sale will have less impact on your credit report and will also allow you to re-enter the housing market much sooner than a foreclosure will.

Lastly, a Short Sale may also provide you tax advantages that may not be available to you under a foreclosure, which could possibly be much more detrimental to your overall financial situation. This handy chart compares the pros and cons of a Short Sale to a Foreclosure.

We have put together this information to provide you with the preliminary details to help you reach the best decision that is best for you. This should address some of the major issues or concerns you may have about a Short Sale. Also we would be remiss if we did not inform you this information is not intended as legal advice. You should discuss your situation with the appropriate tax or legal professional.

Top 10 Short Sale Questions

  1. How do I get started? You should speak with your lender and determine if you qualify for a loan modification. If you don’t qualify or do not like the terms you have been offered then we can proceed with the Short Sale
  2. How do I list my House “for sale”? – under a short sale we list and market your home just like an equity sale. A short sale allows you the opportunity to be in charge of the transaction. You approve and sign the purchase offer, but we include an addendum that states it is subject to the banks approval.
  3. How long does the approval process take? – this can depend upon several factors such as the lender who has your loan and the number of loans against the property. It can also depend upon the financial information that you may have already submitted.
  4. Will my neighbors know my home is a Short Sale? – our board of Realtors requires us to place certain language in the MLS listing information stating the property is a Short Sale. However, to the majority of people who pass by and see your home is “for sale” there will not be any exterior signage indicating a “Short Sale”.
  5. Will I have to pay anything to sell my house? – the bank will agree to pay all of the costs associated with the sale of the property including your escrow and real estate agents fees. This is the typical procedure in the majority of Short Sales. If there are other liens against the property such as mechanic liens, income tax or any other liens against you that are not usually associated with the sale of your house we would have to check with the bank and their policy on paying these other costs.
  6. What happens to the Notice of Default, which has been filed against me? Many times when we submit the listing agreement or purchase offer to the lender the foreclosure process is temporarily halted, allowing you the opportunity to continue to live in your home while the sale is in progress. Timing can be an issue. If you wait until the day before the foreclosure auction is to take place, the chances of successfully stopping the auction and listing your house for sale are very, very slim.
  7. If I complete a Short Sale, can the bank pursue me for the deficiency? – A new law passed in California requires that any lender who agrees to a Short Sale must accept the proceeds as payment in full. This may be one of the biggest advantages of the Short Sale as these deficiency protections may not protect a homeowner who has been foreclosed upon. Again, we urge you to discuss your situation with the appropriate legal or tax professional.
  8. Will I have to pay tax on the “Short Sale” amount? – The IRS has considered the amount which is “forgiven” as income which required you to pay tax on it. However the Debt Forgiveness Act was passed to address the growing issue of underwater borrowers, but this law is slated to expire at the end of the year, unless Congress agrees to an extension.
  9. Will I receive any money from the sale? – With an approved Short Sale all of the proceeds are dispersed to the lender(s) and the costs associated with the transaction. Some banks are now providing the homeowner with a check paid at closing to help ease some of the costs associated with relocating to a new residence. Depending upon the program, proceeds are in the amount of $2500 and it has also been reported that Chase is providing up to an additional $30,000 in some instances. However, payments in the amount of $2500 to $3000 are more likely.
  10. How do I find a qualified Real Estate Agent? – knowing the ins and outs of the Short Sale process is definitely a specialty in today’s market environment. Lenders are constantly revising their guidelines and new legislation continues to surface. You need an agent who is up to date on the latest requirements and who can facilitate this process. We have received special training with the Certified Distressed Property Expert designation and would welcome the opportunity to discuss your situation. Call us today at 626-432-4615.

 

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