5 Reasons Why 2015 Is the Time For A Short Sale of Your Santa Maria, CA Home
- California Senate Bill 931 (SB 931) – This requires that first mortgage lenders forgive the deficiency when they accept a short sale on a dwelling with up to 4 units. (The deficiency is the difference between what was owed on the mortgage, the expenses of sale, and the amount it was sold for during the short sale). Without the protections of SB 931, an individual short sale seller had to negotiate to make sure that the bank forgave the deficiency in the short sale approval. That uncertainty has been removed when dealing with a first mortgage lender in California by this new SB 931 legislation.
- California Senate Bill 458 (SB 458) – Signed into law by Governor Jerry Brown on July 15, 2011 and effective immediately thereafter, it prevents junior lien holders who have accepted a short sale from pursuing a deficiency against the short sale seller. This law expands the protection provided in Senate Bill 931, and is a major development in the area of California short sales. And, I think it makes the case in favor of short sale vs. foreclosure for many distressed California homeowners.
- IRS Guidance & Franchise Tax Board Guidance on liability for short sale debt is favorable for Californians. I always advise my clients to obtain tax advice on their short sale and how the debt will be handled. The gist of the letter is that because CA law makes the short sale debt nonrecourse (uncollectable), the typical “cancellation of debt” taxation that would apply to a forgiven debt may not apply. Since this opinion letter from the IRS was issued in September 2013, most have reported back that the effect of their short sale was negligible on their tax liability. Each person’s tax situation is different and a tax adviser should be consulted.
- HAFA Updates – The government HAFA program has been revised to make processing a short sale smoother under the HAFA. Participant servicers are no longer required to verify financial information (although they still may if they wish), the subject property can be rented for up to 12 months prior to the Short Sale Agreement if it was previously the seller’s principal residence, and the time period for lender response to offers has been tightened.
- It’s just time. – This may be the most important reason. Often, I meet with clients who are considering a short sale and when we begin to discuss things, I discover they have been in financial distress for many years. Others have a 10 year interest only loan that is adjusting to a 20 year amortized payment this year. If your home is massively underwater and you have financial hardship, you should explore all your options including the Keep Your Home California Program, loan modification, and legal process. If you’ve done that already and are ready to put it behind you … a short sale may be for you. If you short sell your property, you may be able to get a new loan in 3 – 4 years under current FHA and Fannie Mae guidelines. The sooner you complete the short sale the sooner that clock begins.
Before deciding whether to do a short sale of your home, it is essential that you obtain legal and tax advice, and consult with an experienced Central Coast short sale agent. If you are considering a short sale of your Santa Barbara County or San Luis Obispo County property and would like a short sale consultation, please call my office to schedule a meeting or a telephone consultation at (805) 938-9950.
Tni LeBlanc is an independent Real Estate Broker, Attorney, and Santa Maria Short Sale Agent. She is a Certified Distressed Property Expert (CDPE) and Certified HAFA Specialist (CHS) serving the Santa Maria, Orcutt, Lompoc, Nipomo and Five Cities area of the Central Coast of California. She has successfully completed short sales with Bank of America, Wells Fargo, CHASE , GMAC, Seterus, IndyMac, Ocwen, CitiMortgage, Green Tree Servicing, Specialized Loan Servicing, HomEq Servicing, Wachovia, Coast Hills Federal Credit Union, Select Portfolio Servicing, Fannie Mae, Freddie Mac, and others.
* Nothing in this article is intended to solicit listings currently under contract with another broker. This article offers no legal or tax advice. Those considering a short sale are advised to consult with their own attorney for legal advice, and their tax professional for tax advice prior to entering into a short sale listing agreement. Tni LeBlanc and MInt properties are not affiliated or endorsed by any lender.