Being underwater on your mortgage can be a very stressful situation, leading to uncertainty about how exactly to ever dig out of this hole. The good news is that there are options. If you want or need to sell your home but owe more than its current value, don't lose hope! A short sale is a viable option. CalHomeCo purchases multiple properties every month via short sale, and will help walk you through the process as well as the advantages and disadvantages of it. While a short sale typically takes significantly longer than a cash sale or even a traditional sale, this can actually be a benefit as an occupant can potentially get several extra months to arrange their relocation  while terms are being negotiated. ​There are several key aspects of a short sale that all potential sellers should be aware of:

Timelines

Short sales typically take between 2 and 4 months to negotiate, get approved, and closed. Depending on the lender involved, liens to reconcile, and other factors, we have had some sales take as long as 10 months to resolve with the possibility of going even longer. While this obviously prevents a quick closing in a week or less, there are sometimes advantages to a longer process; primarily that during this period you have extra time to make other arrangements for your living situation.

Tax Implications

We always advise speaking to a CPA or other tax professional when considering a short sale or your property. As every individual case is different, CalHomeCo cannot advise on the specific tax ramifications of your short sale. Please speak with a licensed professional to understand whether or not you may be responsible for any additional taxes from the sale of your San Diego property.

Deficiency Judgments and Waivers

A deficiency judgment may be created if a property sells at auction for less than what is owed to the mortgage lender. What this means is that the lender still maintains a right to pursue the remaining debt on the property even after it has been sold and the occupant has been forcibly evicted. An example would be a home with a $400,000 mortgage balance selling at $350,000 at auction. In this scenario, the lender could potentially still have a legal right to collect the remaining $50,000 debt from the previous owner even though he or she has lost the home. In a short sale, we are typically able to negotiate terms where there is no deficiency judgment against the seller and their debt is settled for the value of the sale.

Foreclosure vs Short Sale

Many of our clients ask what the benefit of a short sale is vs just allowing the property to go to foreclosure. This is a valid question, as in a short sale the property still passes to a new owner and there are typically not significant proceeds from the sale going to the seller, with the exception of possible relocation assistance funds (see below). However, several benefits exist. One is the likely forgiveness of any remaining debt on the property and avoidance of a deficiency judgment (see above). Another is the extra time in the property while negotiations are being managed. A third is that a short sale has a shorter recovery period than a foreclosure; many of our clients qualify to buy another home in as little as 2 years following the sale. And lastly, a short sale simply allows you to take a measure of control over the process vs your lender calling all of the shots, telling you whats going to happen and when you have to move.

Liens and Judgments

Any additional liens and judgments against you or your property will need to be addressed before a short sale can close. For example, if you owe $10,000 in back taxes to the State of California, there is likely a lien against your property preventing sale. In most cases we can negotiate a release of lien to allow the sale, but please be open and up front about any and all liens you are aware of when speaking to your CalHomeCo representative. A title search will uncover all underlying issues and is always a part of the process, but the sooner we are made aware of these obstacles the better.

Relocation Assistance

Relocation assistance is ultimately given at the discretion of the lender involved in a short sale. While we will always request additional funds for our clients to help with their home transition, there are never any guarantees on this part of the process. However, we are typically able to secure at least $3,000 and sometimes as much as $10,000 to help move.

Is It Right For Me?

There are many factors to consider before jumping in to a short sale. Several of these factors are listed above, but many more exist. In addition to the potential complexities of this process, there are typically other options available as well that you may or may not be aware of and may want to consider. For this reason, we always recommend speaking to a licensed, reputable professional to understand your options and make the most informed decisions possible. Whether you choose to work with us or with another professional, be ensure that you are working with a reputable institution with a record of ethical business practices.