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How to Torpedo Your Orange County Short Sale

Almost 1/3 of the homes currently for sale in Costa Mesa are short sales.

In Huntington Beach, nearly half of the homes in escrow are short sales. This is a problem that isn't going away any time soon, and for some people it is part of their daily reality.

If you have to do a short sale on your Orange County home, there are several things you can do to torpedo your sale.

1. Don't Pay Your Homeowners' Association (HOA) Dues.

- Many of the lenders won't pay past due HOA dues, and the short sale can't be closed without bringing the HOA dues current.

- If you can, keep your HOA dues current or plan to bring money to close to pay for them. Sometimes the lender will pay them, sometimes the buyer will, and sometimes we need can succesfully negotiate the amount, but late HOA dues can torpedo a short sale on your Orange County home.

2. Cash out your 401K

- Most lenders consider money in your 401K, IRA or retirement accounts to be "untouchable" money, money they won't usually require the seller to contibute to the short sale.

- However, if you cash in your retirement account, the bank will consider it fair game for contributions. So, if you don't want to contribute your retirement to your short sale, don't cash it out during your short sale.

3. File Bankruptcy

- Many banks will not agree to a short sale while you are in active bankruptcy.

- If they do agree, it may require that your trustee and/or judge must agree to the short sale.

- The bank may choose to file a Motion for Relief from Stay to take your home out of the bankruptcy and remove bankruptcy protection, which will allow it to sell the home through a foreclosure regardless of the bankruptcy.

- If you can avoid filing a bankruptcy during the short sale process, it will increase the odds that your short sale will be successful.

4. Keep your home poorly

- Buyers will judge your home based on several things including price, location and condition. If your home is poorly kept or is not show ready, they may not make an offer on it even if it's well priced.

- So, keep your home show ready so that it competes well against other homes for sale.

- A little time spent now keeping your home nice will make it more likely that it will sell close to fair market value and thus make a successful short sale more likely.

5. Use your home as an ATM machine

- If you pulled money out of your home to pay off debt, buy cars, take trips, etc., it may be harder to obtain a short sale.

- If the loan is not "purchase money" ( the loan used to buy the house), it is more likely to be a recourse loan (meaning the lender could get a deficiency judgment against you for the amount they don't recoup from the foreclosure).

- If the lender can get a deficiency judgment, they may be less inclined to grant a short sale, particularly without a cash contribution and/or a promissory note signed by the seller.

This is not an exhaustive list of things that will torpedo the short sale of your Orange Count home, but it will give you some idea of the problems you face when short selling your home.

If you have questions about short sales or about options to short sale, please contact me at 714.319.9751.

Short Sale , Deed in Lieu, Loan Modification, Foreclosure, HAMP, HAFA in California and what they mean to you.

Under the HAFA program you have the option of doing a Short Sale or Deed in Lieu. According to current FHA guidelines you can buy another home 2 years after the short sale. The lenders are required to give you at least 120 days to market the home and obtain an offer. The lender does not have to give you more time and you are required to follow the guidelines set forth by the lenders. Many lenders are closing short sales sooner than 120 days so be prepared to move. The only thing I have seen that has been extending the short sale timelines is Mortgage Insurance.

A Deed in Lieu is when you sign the deed over to the lender and walk away from the house. The lender has to give you permission to do so and it has to be a clean marketable title. That means no other liens on the property, second mortgage, mechanics lien, taxes are paid, etc.

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