A real estate short sale is not always the easiest of transactions, but the majority of lenders have streamlined them and the process is not as bumpy as it used to be. Unfortunately, most lenders are not giving any real effort to giving loan modifications which means that many more distressed homeowners are left wondering what to do. There are a few options for homeowners to consider when thinking about how to walk away from the property.
The first option a homeowner can consider is to just let the property go in foreclosure. This option is the most painful and will not necessarily lead to a faster recovery. In the State of California, a foreclosure is okay as long as there is only 1 mortgage lien against the property. If there are any more liens against the property, the foreclosure action (unlike a short sale) does not apply to them and those lenders can continue to chase the homeowner for some kind of deficiency judgement and will most likely force the homeowner into bankruptcy. A foreclosure is reported to the credit bureaus and will stay on a credit report for 10 years.
The next option is a deed-in-lieu of foreclosure. A deed-in-lieu is when the home owner simply deeds the property back to the lending company. Nonetheless, it will be the homeowner's obligation to provide the deed free and clear of any liens. This means that if there is a second or third mortgage, HOA lien, State tax lien, and so on, the homoewner will have to clear those up before the first mortgage lender will accept the deed-in-lieu. In relation to credit reporting, a deed-in-lieu is dealt with the same as a property foreclosure and is documented on credit for 10 years.
The 3rd and best option is a short sale. A short sale is where the homeowner sells his/her property for less than the full amount owed to the mortgage lender. A short sale is very similar to a standard, equity sale, accept that the seller cannot make any money on it, and the seller needs to get approval from all mortgage lien holders. The nice thing about a short sale is that, in the State of California, all lenders with liens against the property must accept the short sale payment as payment in full. And, unlike in a foreclosure, all liens are negotiated and settled and the homeowner can walk away and get a fresh start.
There are many advantages to doing a short sale, as opposed to a foreclosure or deed-in-lieu. A short sale is less invasive and allows the homeowners to decide when and how they want to vacate the property. A real estate short sale also reduces the homeowner's liability in that, in the State of California, no lender can come after a seller for a deficiency judgment after the short sale has closed. Additionally, the IRS created the Mortgage Debt Relief Act of 2007 which, in the majority of cases, eliminates the seller's tax liability relating to the sale of the home. Lastly, when a homeowner decides to sale short, they can be eligible to purchase a home again in as little as 2 years.
The first option a homeowner can consider is to just let the property go in foreclosure. This option is the most painful and will not necessarily lead to a faster recovery. In the State of California, a foreclosure is okay as long as there is only 1 mortgage lien against the property. If there are any more liens against the property, the foreclosure action (unlike a short sale) does not apply to them and those lenders can continue to chase the homeowner for some kind of deficiency judgement and will most likely force the homeowner into bankruptcy. A foreclosure is reported to the credit bureaus and will stay on a credit report for 10 years.
The next option is a deed-in-lieu of foreclosure. A deed-in-lieu is when the home owner simply deeds the property back to the lending company. Nonetheless, it will be the homeowner's obligation to provide the deed free and clear of any liens. This means that if there is a second or third mortgage, HOA lien, State tax lien, and so on, the homoewner will have to clear those up before the first mortgage lender will accept the deed-in-lieu. In relation to credit reporting, a deed-in-lieu is dealt with the same as a property foreclosure and is documented on credit for 10 years.
The 3rd and best option is a short sale. A short sale is where the homeowner sells his/her property for less than the full amount owed to the mortgage lender. A short sale is very similar to a standard, equity sale, accept that the seller cannot make any money on it, and the seller needs to get approval from all mortgage lien holders. The nice thing about a short sale is that, in the State of California, all lenders with liens against the property must accept the short sale payment as payment in full. And, unlike in a foreclosure, all liens are negotiated and settled and the homeowner can walk away and get a fresh start.
There are many advantages to doing a short sale, as opposed to a foreclosure or deed-in-lieu. A short sale is less invasive and allows the homeowners to decide when and how they want to vacate the property. A real estate short sale also reduces the homeowner's liability in that, in the State of California, no lender can come after a seller for a deficiency judgment after the short sale has closed. Additionally, the IRS created the Mortgage Debt Relief Act of 2007 which, in the majority of cases, eliminates the seller's tax liability relating to the sale of the home. Lastly, when a homeowner decides to sale short, they can be eligible to purchase a home again in as little as 2 years.
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