If you are a homeowner facing the possibility of foreclosure, taking the proactive step of conducting a short sale could be an excellent idea. In a short sale, the bank is convinced to sell a property at current market value, even though that value may be well below the amount you owe to the bank. The advantages to you, the seller, can be both significant and numerous.
Most importantly, you’ll be more able to keep your life on track financially. According to most published sources, if you have never fallen behind on your mortgage, you may be able to buy another home immediately. If you have fallen behind in payments, you may be able to qualify to buy again in two years with a Fannie-Mae backed mortgage. With a foreclosure, it usually takes seven years before you can qualify for another mortgage. Your credit score is not as affected either. After a short sale, FICO score drops are reported to be in the 50 to 130 point range. A foreclosure on the other hand can drop your credit score up to 160 points, and will remain on your credit report for seven years, which can make it difficult to even get a rental! Employment opportunities may also be affected. If your prospective employer runs a credit check, your application may be denied if there’s a foreclosure on your record.
In California, the bank is almost always required to forgive the shortfall. Deficiency judgments for a first trust deed are prohibited by law now in California, even if the property has been refinanced, so if the bank agrees to the sale, you are relieved of potentially massive debt. The bank is often motivated to accept the sale, once they become convinced that it won’t sell for more any time soon, and they will also save the costs and time of foreclosing and then having to sell the property themselves.
There’s also the advantage that you are in charge in a short sale. As your listing agent, we let the bank know that you are taking the initiative to be responsible. Because short sales take time to process, you may also end up with more time in your home to figure out your next move. You also won’t face the stigma and emotional toll of being forced out of your home.
Bob and I now have a strong record of effectively representing both sellers and buyers in short sales, and we have successfully closed eight of them in the past year. In one short sale scheduled to close in early March, the bank will forgive several hundred thousand dollars of debt. We have negotiated zero deficiency agreements for all our sellers, even when the banks have tried to sneak something past us, in the fine print, on closing documents. Banks can be tricky to deal with. They often cut our commissions, and make other demands, but they are also willing to negotiate as long as it all makes sense to them.
If you, or someone you know, is falling behind because of loss of employment or other circumstances, time may be of the essence. If things get too far along, the bank is likely to go ahead and foreclose, so don’t delay in taking action. And know that you are not alone. As we write, there are 41 homes in Mill Valley and 16 in Tiburon and Belvedere that are in some stage of the foreclosure process, everything from small condos to $3m plus homes.
The hardest part is making that first call soon enough to get started in time. Even if you are currently working with the bank hoping to get a loan modification, we can get started working on the short sale, but call it all off if you meet with success. Of course, and we hope this goes without saying, we promise total confidentiality
in all our dealings with clients. These times are hard enough on everyone, and we surely hope this stage of bizarre economic gyrations is coming to an end soon.
Call us if you have any questions or just want to know more. And pass this on if you have a friend or neighbor who might need our help.
Pat Ravasio Frank Howard Allen Realtors CA license #01394550
