Paso Robles Short Sales
Paso Robles Short Sales occurs when the proceeds of a real estate sale fall short of the balance owed on the property. In Paso Robles Short Sales, the bank or mortgage lender agrees to discount a loan balance due to an economic or financial hardship on the part of the mortgagor (the borrower). This negotiation is all done through communication with a bank's loss mitagation department.
The home owner/debtor sells the mortgaged property for less than the outstanding balance of the loan, and turns over the proceeds of the sale to the lender, sometimes (but not always) in full satisfaction of the debt. In such instances, the lender would have the right to approve or disapprove of a proposed sale.
Some lender for Paso Robles Short Sales leave a deficiency balance for which the Mortgagor / Borrower is still liable. In 99% of all cases it is not a settlement-in-full. A deficiency balance will remain while the mortgage broker, real estate agent / broker, loan officers, title and closing agents retain their profit. No regulatory agency governs this hybrid transaction.
Extenuating circumstances influence whether or not banks will discount a loan balance. These circumstances are usually related to the current real estate market and the borrower's financial situation.
A short sale typically is executed to prevent a Paso Robles Foreclosure. Often a bank will allow a Paso Robles Short Sale if they believe that it will result in a smaller financial loss than foreclosing. For the home owner, advantages include avoidance of a foreclosure on their credit history and partial control of the monetary deficiency. A short sale is typically faster and less expensive than a foreclosure. In short, a Paso Robles short sale is nothing more than negotiating with lien holders a payoff for less than what they are owed, or rather a sale of a debt, generally on a piece of real estate, short of the full debt amount. It does not extinguish the remaining balance unless settlement is clearly indicated on the acceptance of offer.
Search for all of the available short sale in San Luis Obispo County and homes in Paso Robles.
Short Sales in San Luis Obispo County
Negotiations
Lenders have a department (typically called "loss mitigation") that processes potential short sale transactions. Typically, lenders do not accept short sale offers or requests for short sales until a Notice of Default has been issued or recorded with the locality where the property is located.
Lenders have a varying tolerance for short sales and mitigated losses. The majority of lenders have a pre-determined criteria for such transactions. Other distressed lenders may allow any reasonable offer subject to a loss mitigator's approval. Multiple levels of approvals and conditions are very common with short sales. Junior liens - such as second mortgages, HELOC (Home Equity Lines of Credit)lenders, and HOA (special assessment liens) - may need to approve the short sale.
Frequent objectors to short sales include tax lien holders (income, estate or corporate franchise tax - as opposed to real property taxes, which have priority even when unrecorded) and mechanic's lien holders. It is possible for junior lien holders to prevent the short sale. If the lender required mortgage insurance on the loan, the insurer will likely also be party to negotiations as they may be asked to pay out a claim to offset the lender's loss in the short sale.
Credit Reporting
A short sale does adversely affect a person's credit report, though the negative impact is typically less than a foreclosure. Short sales are a type of settlement. Like all entries except for bankruptcy, short sales remain on a credit report for seven years. Depending upon other credit information it is typically possible to obtain another mortgage 1-3 years after a short sale.
While it is frequent if not common for a lender to forgive the balance of the loan in question, it is unlikely that a lien holder that is not a mortgagee will forgive any of their balance. Further, it is common for a lender to omit updating mortgage balances to reflect a zero balance after a short sale. However, willfully misrepresenting information on a credit report can constitute libel in some jurisdictions, and lenders may be sued in civil court for engaging in this behavior.
See also
How long does it take? Once a purchase agreement has been accepted by the seller and the seller has completely filled out all of the proper supporting documentation for the short sale it usually takes 45-60 days, sometimes longer depending on the lender.
What is the Process for a Short Sale? The process our office follows to complete a short sale is as follows:
1. Within 5 days of the written Purchase Contract, we will submit the short sale package to the seller's lender. This includes all the documents from the seller that the bank requires.
2. The seller's lender will set up the file and assign a negotiator usually within a week.
3. The bank negotiator orders a BPO - Broker Price Opinion which is similar to an appraisal only it's done by a Realtor, not a licensed appraiser. The BPO helps the bank determine if the offer is worth pursuing.
4. Once the seller's lender determines the value the investor will take, they will accept the offer or counteroffer. At that time, the buyer decides to move forward or not. If the buyer wants to move forward, then the seller's lender will submit the file to the investor to sign off. The investor sends it back to the seller's lender to submit the file to a Closer who will prepare the approval letter.
5. When the Approval Letter is issued by the seller's lender outlining what minimal closing costs they will pay and the terms for finalization of the transaction, this letter is sent to the listing agent who will send it to the buyer's agent.
6. The buyer then conducts the property inspection and orders the appraisal. Finish the process for loan approval and get ready to close escrow.
7. The Title Compay will order the preliminary title report and prepare the paperwork to close escrow.
The process takes time, as the bank goes through a lot of internal steps, qualifty control review, committees, various levels of approval, etc. Suzanne Martin's office will call on every short sale file at least weekly to make sure it is moving along, and provide weekly updates. Contact Suzanne for more information!
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