How to Short Sale a Home in California
When a property is facing foreclosure, the owner of the property can attempt a short sale as an alternative. A short sale is the sale of a home or other real estate property for less than the amount owed on the mortgage, with the difference being canceled by the lender. Before a short sale can occur, the lender who owns the mortgage must agree to it. Once agreed upon, the sale must be completed within a limited period of time. Home market values and the local real estate market can play a major role in making a successful California short sale.
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Instructions
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Determine exactly how much remains to be paid on your mortgage. Your lender should provide this information to you when asked, and may include the remaining balance in correspondence relating to the impending foreclosure.
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Appraise the property to determine its current market value. Consult a licensed Realtor or appraiser licensed in California to obtain as accurate of an appraisal as possible.
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Contact your mortgage lender and set up a meeting to discuss a short sale to prevent foreclosure. Provide the lender with proof of a hardship that has caused you to fall behind on your mortgage, income and employment records for the past one to two years, the current balance on your loan and the amount that would be earned if the home sold at its current market value. To approve the short sale, the lender will need to determine whether you qualify based on your hardship and if loss it would suffer is small enough to justify accepting the value of the home if the property sells.
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Wait for a letter or phone call from your lender to inform you of the status of your short sale request. It may take several weeks for you to receive the lender's decision.
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Contact a Realtor or other established property broker if the mortgage lender approves your short sale. While you can attempt to sell the property yourself, a Realtor or property broker will be more likely to find a buyer at the market price within the time frame set by your lender to complete the short sale.
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Inform the lender when a buyer is found for the property. Sign any paperwork presented to you by your Realtor in a timely manner to ensure that the short sale is completed quickly so that your remaining mortgage debt can be canceled.
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Keep track of the amount for the portion of your mortgage that was not covered by the short sale. You should receive a copy of Form 1099-A or 1099-C that details the amount of your debt that was canceled. Depending on the amount, this amount may be considered cancellation of debt income and must be reported on both state and federal income tax returns.
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Tips & Warnings
In the past, California has allowed for exclusions in the taxing of cancellation of debt income. As the status of these exceptions changes each tax year, consult a tax professional to determine whether some or all of your CoD income is taxable.
If your property doesn't sell within the time set by the lender then your short sale option will end and the lender may proceed with foreclosure.
References
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Comments
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It's worth mentioning that, in a short sale, all fees are paid by the bank, not the seller. Working with a short sale specialist will substantially increase your chances of success, reduce your anxiety about the process, and it's free! See www.myshortsalegroup.com for more details on California short sales.
