The term short sale is heard more and more in the housing market today, especially in California’s distressed housing market. What is a short sale? When a homeowner feels obligated to sell their home for a price below what they owe on their mortgage, that is a short sale. When a homeowner sells their home in a short sale, oftentimes they wind up owing their mortgage lender money rather than gaining a profit for the sale of their house.
There are many reasons why someone might come to the point where they have to sell their house for less than the mortgage price. Issues with the COVID-19 virus, extended unemployment, or drastic changes in the housing market (as seen in California), to name a few. Whatever the cause, there are things you should know before you enter into the process of a short sale.
When short selling your home, there will be three sides to the agreement: the mortgage lender, the home seller, and the short sale negotiator. They must all come to an agreement, especially the mortgage lender. So, for example, the mortgage amount might be $600,000, but all parties agree that the sell price of the home is only $550,000. The remaining $50,000 is the deficiency judgment of the short sale.
Although in some situations the home seller is still responsible for the deficiency judgment, there are certain situations where it is forgiven. For example, in California during a nonjudicial foreclosure, the home seller is not on the hook for the deficiency judgment. Another factor to be determined during this process is who pays the property taxes. In California, if all calculations are done correctly, the mortgage lender will pay the property taxes.
If you are facing a short sale, Soldavi and our short sale partners can assist you greatly through this complex and confusing process. If you are looking to buy a short sale home, Soldavi can help you navigate that, too. There are pros and cons to buying a short sale, however. On the con side, you have to know the house is sold as-is, and you need to look for any costly repairs that might drive up your expenses. On the flip side, there is the “deal” factor, because you are getting the house for a lower price and there is less competition involved in the buying process. Soldavi and our partners will help you navigate all aspects of the short sale process. Contact Soldavi today for more information.