Contra Costa short sales, including Alameda County short sales:
Catherine Myers has been a licensed working Contra Costa Realtor® since 2002. However, we saw a dramatic shift in our real estate market in beginning in 2006. In addition to serving the needs of equity (regular) sellers and buyers, Catherine has been working with Contra Costa and Alameda County short sales, since late 2006. The goal first, is to help you find resources to save your home if that is your goal; whether it is through free HUD counseling, a loan modification program through your lender, or a referral to an attorney for other options which could include bankruptcy.
Each and every short sale carries with it a different set of circumstances, and a whole unique set of challenges. So here are some commonly asked asked questions about short sales in Contra Costa, but remember, none of the information below should serve as a substitute for legal and tax advice from a reputable attorney or CPA.
We’ve also seen a phenomena lately of “rescue agents” offering to “rescue” you from foreclosure. The truth of the matter is, whether you are short selling your home, or foreclosing, you are losing your home. It is a momentous decision and can bring a wide array of emotions. Research all your options, first. A short sale isn’t the right answer for every situation. I suppose this “rescue” philosophy insinuates they will rescue you from the actual act of a final foreclosure sale, but many short sales are already in some aspect of the foreclosure process (or will be as soon as mortgage payments are missed). Some credit experts also tell us there is no discernible difference in the resulting credit score hit between short sales and foreclosure. The late payments will kill any credit score regardless of how it ends up (foreclosure or short sale). Bottom line both routes to losing your home can result in consequences which we’ll discuss in more detail below.
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What is a short sale?
A short sale, in the simplest terms, is when you owe more money on your mortgage(s) than what the fair market value on your home will bear. If you need to sell your home, but you are upside down on your mortgage, owe more than the home is worth and are completely underwater; we work with your lender to approve a short sale on your home. We are experienced with working with all major lenders, and commonly work with seconds, equity lines, and equity loans.
We market your home to the public like any other sale. We work with your bank in a proactive, methodical manner in order to obtain an approval that meets your needs and your future goals. We recommend to all of our short sale sellers to consult with legal and tax professionals.
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Where can I get some help about short sales, or saving my home from foreclosure?
There are many resources out there available to help you avoid a short sale or a foreclosure. If you would like to keep your home, you do not need to pay any money to get help. There are free HUD counselors, free workshops and clinics conducted by your bank or local cities, and many websites to help point you in the right direction. Here are just a few:
- Making Home Affordable – official government program to help you save your home and know your options.
- HUD Housing Department Foreclosure Avoidance – official government page to help you find a FREE and knowledgeable HUD housing counselor to help you.
- Know Your Options by Fannie Mae – avoid foreclosure and get help.
- Keep your home California – a site sponsored by CalHFA mortgage assistance to help Californian’s keep their homes, and know their options.
- Homeownership Preservation Foundation – foreclosure isn’t the only option, 888-995-HOPE can help, free.
Do most banks have online or local resource centers to help?
YES! See below for some of the major lender online portals for help. Many also host local homeowner assistance workshops, check their sites.
- Bank of America Home Loan Assistance Center – homeowner assistance, know your options, B of A options to help with your home loan.
- Bank of America Short Sale Resources – consumer resource page if you have a Bank of American loan.
- Chase Mortgage Help – options to retain your home, modifications, unemployment help
- Chase Short Sale Resources – Chase’s consumer resource page for information.
- Wells Fargo Help for Homeowners – get information here about repayment plans, modifying your loan, workshops, outreach.
- Wells Fargo homeowner assistance – sell your home for less than you owe.
- Wells Fargo loan modification – start right online to modify your loan.
- Citi Mortgage Homeowner Assistance – what to do if you’re missing payments, or facing foreclosure.
- Aurora Bank Foreclosure Prevention Resource Center – NOTE: Aurora has transferred all their short sale servicing – ask me, I can help.
Why do I need to speak to a CPA or attorney about a short sale?
Yes! You should always consult with a qualified professional CPA and attorney before proceeding with a short sale. A short sale can have serious consequences. There can be credit consequences (drop in your fico scores and inability to buy a home for up to 3 years), there can be tax consequences of a short sale (whether you will owe tax on the “cancelled debt” is dependent upon the type and nature of YOUR loan) and there can be legal consequences (can your bank pursue you for the deficient balance after the sale?). All of these concerns are best addressed with the appropriate professional, though there are some resources available to you online:
Taxes: Are you eligible for Mortgage Debt Forgiveness for your federal taxes? Check here to read about IRS short sale/foreclosure debt forgiveness
Taxes: Are you eligible for tax relief through the state (SB401)? Check here to read about California’s SB 401 mortgage debt provisions
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What if the only loan(s) I have on my own were for the purchase of my home only?
If you only have one loan, or you obtained a second to serve as your down payment, you may be protected under the California “non-recourse” laws. It was common that people with no money down got 80% first loans, and a 20% second to bridge the gap and allow a purchase with no money down. Both loans may be considered “non-recourse” if both were used for your purchase only. Others put 10% down, then got a 80% first, and a 10% second to avoid mortgage insurance (MI). Again, if the loans were obtained and used AT the purchase, you may be protected by the non-recourse debt rules. Check with an attorney, always. The good news in California is that on first loans, if the lender forecloses, or short sales, they can not pursue you any more. You are done. (though there may be exceptions for suspected fraud, etc, but that is another topic for your attorney!)
What if I refinanced my first loan, or my lender says they’ll sue me for the deficiency?
You may be protected by some recent laws passed in California. Often, your primary loan, the one used to purchase your home (also called purchase money) is protected under our law SB931 which came into effect January 1, 2011. This prohibits any first lender who accepts the offer of a short sale from pursuing you following the closing for any deficiency amount. The wording also seems to indicate it will cover investment property and refinanced debt too, again, always double check with an attorney. Many lenders too have interpreted this to mean they can no longer ask for a promissory note, or cash contributions at close. However, it’s not necessarily uncommon for a seller to offer money if needed to bridge a gap between what the bank requires, and the buyer will pay. Remember, a bank does not have to agree to a short sale, and when they do, it will be under their guidelines, which are not always favorable.
Are there any protections for Contra Costa short sales regarding recourse debt?
If you refinanced and got a cash out or took out a second mortgage, home equity line of credit (HELOC) or a home equity loan AFTER the purchase of your home, it could be considered recourse debt and therefore you need a realtor who understands how to work with these secondary mortgages. These lenders in the past would often approve the short sales (release their lien only) but RETAIN their right to pursue you for the deficiency later. An experienced short sale realtor could often negotiate away the deficiency language, and/or the seller could persuade the lender to relieve them of further obligation with a cash contribution, however, a new law was passed in July 2011 has changed a few things.
This new law, SB 458, provides that if a second lender takes consideration (money) to approve a short sale, they will give up all rights to future deficiency. Sounds good huh? Well, many second lenders aren’t so keen on signing away what could be a substantial sum of money! We are seeing now second lenders asking for hefty cash contributions in order to agree to a short sale, so if you owe 200k on a home equity line, don’t be surprised if you’ll be asked to contribute – sometimes up to 10-20% in order to relieve yourself of all future exposure to that lender. You can read more about SB458 at The Contra Costa Short Sale Blog.
Do all banks do short sales?
So far, yes. We’ve seen all major lenders work to streamline the foreclosure process. Now our version of streamline and theirs may be different, the fact is, that short sales have gotten a little more predictable over the last few years (note I didn’t say easier!). Major lenders such as Bank of America, Wells Fargo, GMAC and Nationstar work with an online portal called “Equator.” This online system makes it easy to work with these banks, upload required documentation and communicate directly with our representatives as needed. Other lenders, such as Chase have much improved their short sale process. We’ve worked with all the big national banks including what we’ve already mentioned and including CitiMortage, Wachovia, E-Trade, PNC, IndyMac, ING, Schwab and more. We’ve also worked with more regional or local Bay Area lending institutions such as Redwood Credit Union, Bank of the West, CitiFinancial and more. Now there are a couple of banks that are so bad at their short sales, you need to be prepared for a long frustrating process, We’ll let you know if you have one of those banks when we discuss your short sale.
How do I start a short sale?
We offer FREE and confidential consultations. We offer referrals to attorney and tax professionals as well as contact information for local HUD and home retention counselors. Don’t wait too long to contact us though, time is of the essence if you’ve missed payments, or are about to. When we meet we’ll provide you a list and documentation specific to your lender, but know that most banks will ask for the following:
- Financial statement (each bank has their own)
- Last 2 pay stubs or other income verification
- If self employed, they’ll want P&L statements
- Last 2-3 months of bank statements
- Hardship letter detailing your situation
- Last year (sometimes two) federal tax return
- W2 or 1099 for at least the last year
- If an investment property, some banks will ask to see your lease agreements
- Other forms many lenders ask for include the IRS form 4506-T which allows them to retrieve bank tax return information
If you are interested in the HAFA program, you can get more information at the government site Making Home Affordable. A HAFA short sale can be started early, so don’t delay in contacting us. We can walk you through the process, though the first step is usually calling your lender and telling them you wish to be considered for HAFA, as they will send you a packet of documents and forms to be completed. HAFA short sales have a whole other set of forms required. It is NOT the same as a traditional short sale. An advantage of this HAFA government program is a $3,000 relocation incentive paid at closing (it can also now help pay off second liens, HOA debts or other “surprises”)
How long will a short sale take?
Most lenders are approving short sales within 3-7 weeks these days. Having a complete packet submitted all at once plays a huge part in streamlining and expediting the process.
Can I buy again after a short sale?
Yes you can! Many banks will have a 3+/- year wait period and you will have to rebuild your credit, BUT, if you are moving for a job, have had a personal crisis or family emergency, there are some lenders able to lend to you right away per some very strict standards. If you are in this type of situation (relocation, no missed payments, death, divorce, illness, etc), ask for more information and I can get you in touch with an appropriate lender to guide you through the process.
What is difference between foreclosure and short sale?
There are a couple of significant differences between foreclosure and short sales. These days, one of the biggest differences we see is time/timing. A short sale from start to finish can be completed within 2-4 months (usually, depending on several factors). A foreclosure can take a year or more to complete. That is a year or more of missed payment to impact your credit score, calls from the collection arm from your bank and the public notices that are posted.
Another significant difference is in dealing with second loans/equity lines. In a foreclosure, it seems “usual” that it is the first lender that does the foreclosure action and ultimately forecloses on your home. If you had a recourse second loan or equity line, it is not settled and may become an “unsecured” debt. It will follow you. You will likely start being contacted by collectors right away. It will not just go away. Same with HOA dues. In a short sale we work to settle these debts the best we can so that you will not be “haunted” by your debts later. Again, check with an attorney as sometimes a bankruptcy is better, especially if a second lender does not wish to cooperate with a short sale. You have to know your options.
How do I get more information?
Please feel free to contact us using the contact form here on our website. You can also visit our Contra Costa Short Sale blog for more articles written by Catherine Myers related to short sales in Contra Costa.
Also note that when you enter default with your lender, it becomes a public record. When that happens you may be approached by many people who claim they want to help you. Some are legit, many are not. The Contra Costa District Attorney has recently issued an advisory alert that is mailed out to defaulting homeowners. Check out a recent blog post about this HERE.
Warnings about foreclosure fraud
The California Association of Realtors has recently published a website all about short sales and foreclosure fraud. They keep a “scam alert” page updated monthly, so read about the most recent fraud activities we’re seeing out there related to foreclosures and short sales and BEWARE. Scam Watch and Scam Resources. Check out the full California Short Sale site from the California Association of Realtors: California Short Sales and check out the many consumer resources available.
We’ve worked on hundreds of short sales, most are successfully closed! We’ve worked with:
- Wells Fargo short sales
- Wachovia short sales
- Bank of America short sales
- HAFA (all banks)
- Aurora short sales
- Chase short sales
- e-Trade short sales
- Bank of Walnut Creek short sales
- Redwood Credit Union short sales
- Indymac short sales
- AHMSI (American Home Mortgage) short sales
And several more. Ask for the specific loss mitigation requirements for each bank.
Ready to ask more questions, or work with us? Contact Us through our website!
None of the information provided here should serve as a substitute for legal and tax advice from a reputable attorney or CPA.