San Diego Short Sales - Buying or Selling a Home in a Short Sale

San Diego Short Sales

Short Sale in real estate means that the lender has agreed to accept less than the total loan balance due. Not all lenders will agree to receive less than the amount due and accept a short sale, especially if it makes more financial sense for the lender to foreclose the property instead! In addition, not all sellers or all properties qualify for a short sale.

Common reasons lenders will agree to a short sale:

  • The mortgage is in arrears or in foreclosure stages.
  • The property is in poor condition.
  • The homeowner has hardships and cannot afford the payments.
  • New homes in the area are being chosen over existing homes.
  • The area or neighborhood has depreciated in value.
  • The lender’s shareholders are concerned when there are too many defaulting loans on the books.
  • Some lenders are required to prove a loss each month…Let’s help them out!
  • Some lenders are required to have an amount equal to or up to six times the retail value of each REO “on Hand”
  • An REO is a liability, not asset. Too many liabilities will cause any business to go under if not dealt with quickly.

Can I short sale a nice property?

Absolutely! As you can see above, lenders will short sale a home for many reasons other than the poor condition of the property.

What happens to the homeowner’s credit?

When negotiating a successful short sale, keep in mind that the agreed upon price is payment in full. However, the homeowners may still owe the difference between the loan balance and the discounted amount via a “deficiency judgment.” If granted, this judgment will affect the homeowners and their credit report just as any other judgment, unless the lender has agreed to accept “payment in full without pursuit of any deficiency judgment.”

Short Sales & Taxes

When a lender has accepted a short sale on your property, the discounted amount (the difference between the loan balance and the short sale) may be declared as income on your income tax return by means of a “1099 form.” You should speak with your accountant for advice.

Buying a Short Sale

Buyers call us inquiring about short sale properties in San Diego because they think that they will be buying a good deal.

In fact you might want to think twice about making an offer on a short sale or pre-foreclosure (as it is also known) home. Buying a short sale home is not as simple as you may believe and it is nearly impossible to close a short sale escrow in 30 days or less. In most cases you will not even know if the lender has accepted a short sale 30 to 60days after you have submitted an offer to purchase.

Just because a home is listed with short sale terms does not mean the lender will accept your offer, even if the seller will accept it. The lenders want to see offers before they actully start considering a short sale on a property. Some agents with or without the seller’s advice will list the home at a price way lower than the comparable prices in the area with the hope to generate a few purchase offers for the lender to see and start the conversation with the seller about considering a short sale and at what price. Plese keep in mind that one hundred percent of the time that you see a list price that is way too low for a home that is listed as a short sale, the lender will not accept the short sale at that list price.

In addition, due to the mistake that the sellers or their agent did by listing the property in such a low price (way under the comps) the most probable is that the property will sooner or latter go into foreclosure and you might see that property listed again as a bank owned property (REO).

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