My personal opinion is that any time you the Homeowner realize either immediately or over an extended amount of time that you honestly can't continue to make the payments but you are stuck because the loans on the house far exceed the property's value, by offering to Short Sale your home shows integrity and responsibility instead of just "giving up" and letting the bank begin the process of a foreclosure. A lot of my clients feel like they're trying to help the lender out by offering the home for sale, maintaining it in a good showing condition and allowing real estate agents to show their home even though there's no monetary reward in it for them. Some of the lenders are beginning to come around and they've staffed the departments that deal with Short Sale transactions. My most recent calls to a few of the largest loan companies were actually very pleasant and the lender representative was showing compassion for the client's situation. Since there are numerous situations that can get you into the position of needing out of your home when the value is lower than the potential sales price, I feel it is very important for the lender representative to not judge the defaulting borrower. A good number of our clients were caught off guard financially when a relative's health deteriorated and all their time, money, and energy went to assist them. Some of our clients have been folks who put 10-20% down payment with the intention of staying in their home for a long time only to find themselves without employment and a rising house payment. Of course, there are just as many clients who admit they just bought at the wrong time, took a loan that fit their short term needs thinking the home would appreciate and they could refinance in a year only to find the value dropped, the easy qualifying loans disappeared and they're caught with their pants down. In any of these scenarios, the fact remains: In California it takes roughly 9 months for a lender to gain control of a home that is in the default process. By the time they get the home on the market and secure an offer it's closer to a year after the initial default. In a plunging market this could represent an additional loss of home value of 10-20%! So, can you see why it seems "angelic" for a distressed seller to agree to offer the home for sale during the first few months of default in order to limit the lender's damages? Our tax CPA team mate has provided much confidence to the sellers on the issue of owing taxes for the amount the lender loses. As the tax document reads, if the owner is insolvent at the time the home closes and they are issued the 1099, they can fill out the form 982, check the box insolvent and poof, NO TAXES ARE OWED!!! Ever!
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