Costa Mesa Short Sale Myths

 

I figured since St. Patricks Day is upon us, and since everyone will be looking for a leprechaun at the end of a rainbow with a pot of gold coins, it might be good to look at a some Costa Mesa short sale myths. Don’t get me wrong – my irish brain still thinks there might be a leprechaun :), but in case it might be a myth. Anyway, 2012 continues to see lots of Costa Mesa short sales, and we should see quite a lot towards the 2nd half of the year since it appears the debt forgiveness act will expire at the end of this year. If you are considering a Costa Mesa short sale, there have been a lot of Costa Mesa short sale myths.

 

Let’s look at the ten biggest Costa Mesa short sale myths if you are considering a short sale:

 

Myth 1: The Homeowner must fall behind on payments.

 

Answer: Wrong. While many servicers wouldn’t look at you three years ago if you weren’t behind on payments, now that is simply not true. It would now be looked at as a responsible choice.

 

Myth 2: After a short sale, the bank will issue a 1099 and force you to declare the loss on your taxes.

 

Answer: Not Today. Currently, the Debt Forgiveness Act in the state of California is powerful – it forgives the primary and ALL junior lien holders should lenders agree to a short sale for the remainder of 2012. This is definitely the year to get it done if you are considering it.

 

Myth 3: Banks would rather foreclose than work out a short sale.

 

Answer: Nope. The bank loses $50-$70k on each home that they foreclose on. The banks have become gradually easier to deal with since 2008. You MUST have a hardship though. A recent Chase short sale I completed offered the homeowner $25,000 to accept a short sale arrangement! If you are a Chase loan holder and want to do a short sale, contact me – I know how to ask for the money to move.

 

 

Myth 4: Homeowners must be pre-approved to do a short sale.

 

Answer: No sir. Depending on your situation, you simply do not need to be pre-approved. After a try at a loan modification, some banks will tell you that you are pre-approved to do a short sale, but don’t let that be your guide.

 

Myth 5: Damage to your FICO score is the same as a Foreclosure.

 

Answer: No Ma’am. The impact on your credit and FICO scores is considerably less than what a foreclosure would bring. People that completed short sales in 2008 are already eligible to purchase another property.

 

Myth 6: Short sales will never close.

 

Answer: Not True. Short sales are difficult, they take time, but more than half do close. It is important to find an agent who knows what they are doing. You must have a hardship too – the only short sales that I have not had a perfect track record on is because the borrower had no true hardship.

 

Myth 7: Following a short sale, you can’t buy another house for 7 years.

 

Answer: Absolutely not true. As I mentioned, previous short sale participants are already purchasing homes just 3 years since doing a short sale and in some case only 2 years. Believe me, the banks need to lend to make money. If everything else is in order on your credit, you can buy again soon.

 

Myth 8: The lender will sue the homeowner after the close of a short sale (or foreclosure, or deed in lieu of foreclosure) for the deficiency.

 

Answer: California has certain anti-deficiency protections in place for short sales and foreclosures, depending on the circumstances. I am not an accountant, but a good accountant will get you the right information regarding the short sale information.

 

Myth 9: Short sales take months and months to close.

 

Answer: Not true. A good agent can get them done in as short as 30 days. Most take a little longer, closer to 60 days. If you are lingering in a short sale for more than 7 months (like one of my buyers is now), you probably are working with an agent who doesn’t know how to process a short sale efficiently.

 

Myth 10: The bank won’t foreclose on me, I have a loan modificaiton in process with them.

 

Answer: Believe me, they will foreclose. If you have not paid your mortgage in several months, and especially if you have not paid in more than a year, they will definitely foreclose. I have spoke to two owners recently who were in denial, were turned down for a loan modification, and the bank promptly foreclosed on them within 30 days. They would have been better served financially to do a short sale. It still would have taken a few months, but more than likely with a hardship, the bank would have agreed to the sale. Don’t take them lightly, they are more serious about foreclosing than they used to be.

 

The easiest way to have the bank agree to a short sale is to have a true hardship, as I have mentioned. A few hardships are:

 

That’s just a few of them. You will need to fill out a worksheet which will tell the bank if you can afford the home or not. It is a smooth process with a hardship.

 

Need other help with a Costa Mesa short sale? I would love to help, even if it is just to consult me on your circumstances. Feel free to contact Colin at (714) 743-9882 or E-mail me here to reach me.