Agent Tips: Short Sale Your Home – Don’t Let it Go

Murrieta Residents – Short Sale Your Home of Letting it Go

I always get asked by my clientt here in Murrieta, “Why do I need to short sale my house when I can just let it go?  from homeowners who are upside down with their house value. They are struggling to keep up with their payments. “Can’t I just let the house go, and wait for the bank to tell me to move?”. The answer is ABSOLUTELY you can, but is it worth it?

 

Let me explain from  my own experience in short selling our own home.

 

Like most sellers, we first sought out the option to modify our home loan, but  like the majority of other homeowners, – Banks were not willing to modify our loan. Let me correct that, and say that they would offer a modification, but it was only a reduction of $100 a month in our payment. Not really the help we needed or were looking for. We were left only with a few options.

Walking away from your home is not a good idea. Short sale your home

So if the banks were not willing to modify, then what were our other options:

  • Walk Away
  • Died-in-Lieu
  • Filing Bankruptcy
  • Short Sale

While Walking away may have seemed like the easiest of the options, this is probably the worst. Like other things in life – Nothing is “That Easy”. By walking away from our home – we were basically telling the bank that they can do whatever they want with the house – and we were done dealing with them. The banks at that point would not be happy, and not only expedite the foreclosure proceedings, but the second lien holder and mortgage insurance could then come after us for what is called a “Deficiency Judgment After Foreclosure” since their debts would not have been settled.

 

If we only had one loan and no mortgage insurance on the home, then we would have been OK since California is a non-recourse state. Meaning:

 

“A type of loan that is secured by collateral, which is usually property. If the borrower defaults, the issuer can seize the collateral, but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount. This is one instance where the borrower does not have personal liability for the loan.”

 

We were not so fortunate, like most other FHA or 100% Financed buyers, we had a second loan and a mortgage insurance company to deal with.  Something to  note – one lender does not necessarily mean you only have one loan. You may be sending two separate payments to the same bank meaning you have TWO loans. Two different loans usually have two different investors who own the loan.

 

Here is what could have happened if we didn’t Short Sale our Murrieta Home. The primary lender would have foreclosed on the house, and then sell it as a Bank Owned property within a few months. The secondary lienholder, and mortgage insurance company would not have received any payments to settle the debt. They could then file for a deficiency judgment against us for – UP TO 4 YEARS – later in California. Why? Because they never received a settlement offer for what they were owed. While easy to walk away, we did not want to be worrying for the next four years if the second bank would be filing a claim against us.

 

We really did not want to have to keep looking over our shoulders wondering if that day would ever come. Read this Article from CNN about banks coming after homeowners after losing their home

 

We then thought about filing Bankruptcy as another option that an attorney suggested. There is one inherent flaw in this. Banks can pull the home out of Bankruptcy court in order to sell it and recoup some of their losses. So the house would need to be SOLD first before a bank can calculate their losses deficiencies.

 

Remember, the banks have 4 years after to file a deficiency claim. So long after the bankruptcy would have been completed, we would have lost the house, have a BK on our record, and still owe the second lienholder or mortgage company.  Most people say, well the solution is to include all debtors in the BK filing. This while Ideal, is not always possible. Loans are sold and traded all the time, so naming the right party in your filing is the huge challenge.

 

This is why our best option was to Short Sale our house. During the short sale process, we were able to negotiate “Settled in Full for Partial Payment” for the secondary lien as well as the Mortgage insurance company. Knowing that the debts were settled literally for $3000 and $1000 respectively,  we were able to sleep at night, and not worry for the next 4 years that you could still be on the hook for thousands of dollars on a home we no longer owned. The best part is that in order to short sell the house, the primary lienholder payed off these lien. We paid nothing out of pocket.

 

So if you are struggling with your payments and your house is substantially below what your bought it for, really take some time to evaluate all your options, and avoid paying people upfront to modify your loan or stop the foreclosure process. We can help Short Sale Your House here in Murrieta CA, and Get the Peace of mind you need and deserve.



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