Short Sales

Royal Oak Realty can help you with the short sale process. We can contact the bank, find out if they are willing to do a short sale and if they are, guide you through the process carefully.

We can often pre-negotiate a price making the closing time quicker!

This can be a stressful time, but it does not have to be. Let us help you, we will make it as painless as we can! Please read below for a brief description of what a short sale is .

SHORT SALE or PRE-FORECLOSURE SALE

The Short Sale (PFS) allows the homeowner in default to sell his/her home and use the net sale proceeds to satisfy the mortgage debt even though these proceeds are less than the amount owed.

If other foreclosure alternatives, such as Loan Forbearance plans or Loan Restructuring, are unlikely to succeed because of the homeowner's financial situation and/or no desire by the homeowner to retain ownership of the property, then the Short sale may be the most suitable course of action.

It is important to note a Short sale must be approved by your lender.

The advantage of a Short sale over a foreclosure is that you avoid having a foreclosure on your credit file for ten years. Also if a Short Sale is negotiated properly with your lender you can avoid a possible deficiency judgment. A deficiency arises when the house is sold for less than the amount of the loan.

Deficiency Judgment - See California Code of Civil Procedure Section 580. The Code states if the Deed of Trust is a purchase money loan secured by a house that is the borrower's principal residence, the answer is generally, “No.” However for refinance loans or home equity lines of credit a lender could go after the borrower.

 Short Sale Deficiency Judgments Tax Liability (click here)

TAX LAW CHANGE AS OF DECEMBER 20, 2007. See Article - President Bush Signs H.R. 3648, The Mortgage Forgiveness Debt Relief Act of 2007

Whether you decide on a Short sale or lose the home to foreclosure you may liable for income taxes on the difference.

For instance, if the foreclosed homeowner has a $500,000 loan and the lender sells the house for $450,000, the homeowner may have to pay taxes on the $50,000 difference if the loan is a recourse loan. The $250,000 tax exemption for singles and $500,000 for joint filers does not apply to debt relief income, in this case the $50,000.

The tax owed on the debt relief is based on the homeowner's ordinary income tax rate, not the lower capital gain rates. The exclusion, however, may still be available to reduce any capital gains in the difference between the sales price and the homeowner's basis.

If I receive a Notice of Default, What is Foreclosure Time Line? click here

What does the IRS say? click here

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