Mike’s Real Estate Show

This Easter Sunday we are discussing interest rates and foreclosed properties. Here are some terms you’re hearing everyday which might need clarification. In today’s market we have “pre-foreclosure”, “Foreclosure” and “Post-Foreclosure” properties and events along this cycle. A “Short-Sale” is a Seller who owes more on the property through his loans than the property is WORTH.

You have a property with a 1st of $400,000 and a 2nd of $100,000 but the property is only worth $430,000. You are “Short” $70,000. What we try to do is go back to the “lenders” in this case and explain the scenario of the current marketplace and see if they’ll budge by reducing the loan amounts to sell the property. The lender will ask for a “Hardship” package which you, the Seller, must put together. The Lender is looking for assetts and ability to pay. If you demonstrate you have another house in Tahoe, big IRA or retirement account, chances are you’re NOT going to get a “Short-Sale” but if you are pretty much tapped out–chances swing the other way! If they do grant a “short-sale” then the amount “Short” falls under the “Debt Foregiveness”. This debt is thereby “forgiven” by the lender. Recent legislation states if this is your “primary residence” then you have debt forgiveness up to $2,000,000 for the next three years. However, this does not STOP the lender in trying to get you to sign a “unsecured” promissory note for some of that forgiven loan. In the example above they may say, “Look, we’re forgiving you $70,000 to make this transaction work. We want a $50,000 promissory note which YOU the Seller are going to sign in order to close the deal.”  At that time you need to speak with an attorney. However, we don’t know if this is going to happen until we actually go to sign off!! So with a “Short-Sale” nothings settled until the fat escrow lady sings!! That’s why we reccomend the Buyer’s don’t make any moving arrangements until escrow closes and that YOU the Seller try to get a lease-back for a week or so AFTER the close so you have time to get out of the house.

  So the “pre-foreclosure” sale is a “Short-Sale”. You can also have a notice of default filed (NOD) which is filed after you’ve missed 3 payments if not more and stil do a “Short-Sale”. You are then in the “Foreclosure” phase of the process once the NOD has been filed. One an NOD has been filed you have 122 days until the property is actually SOLD at the county courtsteps. This is for California. Many lenders will “Stay” or stop the process, iif the “Short-Sale” looks legit.  But “Short-Sales” are very tough to get approved. Currently in our MLS (Multiple Listing Service) we have around 650 active listings which state they are a “Short-Sale” but we only closed 11 of these in February (last full month reporting)–or 4%!!!! So you have a 96% CHANCE OF NOT getting a short-sale approved. Not very good odds. BUT!! It just could go through and save your credit scores. So give it a shot and check out my web site: www.SonomaCountyShortSales.com for more information.