What is a real estate short sale? 

A real estate short sale is when you owe more than your property's current value but you need to sell. In a typical real estate transaction, your mortgage lenders would require you to come in with the difference in the amount owed. In the case of a short sale, we negotiate with your lenders to accept a pay-off that is less than the amount you currently owe and you do not have to pay the difference.

How much will this cost?

Since the majority of people facing foreclosure do not have the necessary funds available to pay for typical real estate transaction fees, all of our services will be paid directly by your lender.  Absolutely NO fees are due from you.  We only receive payment if our negotiations with your lender are successful.

What is required for a real estate short sale?

In order for us to get a real estate short sale accepted for you, we first must list your home for sale. During the listing period, you will need to provide the following documents to us so that we may package a real estate short sale request to your existing mortgage lenders.  Each lender has unique requirements but the following items are almost always requested.

Please gather the following:

-Last two years W-2's or tax returns if self-employed
-Most recent two months of paystubs or current Profit and Loss (P&L) if self-employed 
-Most recent two months of bank statements for checking/savings accounts
-Current mortgage statement or payment coupons for all existing mortgages 
-Hardship letter explainding your situation and need to sell 

With these documents we create a package and submit it to the appropriate department with your lender once we have an accepted purchase offer for your home.

Who can qualify for a real estate short sale?

There are multiple reasons why a mortgage lender will accept a real estate short sale.  For one, if your financial situation has changed and you are currently making less money than before you most likely qualify for a real estate short sale.  Second, if you have more money going out each month than you have coming in, you are a qualified short sale candidate.  Lastly, everyone's situation is unique and the lenders will take all short sales into consideration.  The hardship letter usually outlines the reason for your short sale request. 

How will a short sale affect my credit?

What typically happens is the loan will show up as “paid" on your credit report; however there can be a notation that says "settled for less than originally owed.“  This is much more favorable than having a foreclosure on your credit report.  In addition, the bank/lender reserves the right to add a deficiency judgment to your credit report for the discounted amount.  In the state of California a bank/lender is not allowed to place a deficiency judgment against a homeowner if the transaction is a purchase money loan on a primary residence.  Upon request, Pacific Real Estate Network will not sell your property unless we get your lender to agree to the following:  “payment in full without pursuit of any deficiency judgment.”  Please do not postpone the inevitable and wait until you are close to foreclosure.  The best way to preserve your credit is to act quickly.  Your credit will not be affected as much if we can successfully complete a short sale within the time frame of a couple missed mortgage payments.   

How will a short sale affect my taxes?

***The National Association of Realtors (NAR) has announced that on December 20, 2007, President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007, which states that Homeowners who have experienced a Short Sale will not be taxed on the Mortgage Debt they have been forgiven to sell their property.***

According to the IRS, if you have reached a compromise or settlement with a creditor/lender agreeing to release you from any further obligations regarding the repayment of a debt, a creditor/lender may report this as "cancellation of debt" income.
Your lender may choose to "write off" all or part of the debt it claims that you owe, and report it as a tax loss to the IRS using a 1099-C.  In most cases, you are able to avoid taxation.  The IRS recognizes five situations where a cancelled debt may not have to be reported as income. 

1.  Insolvency - your total debts exceed your total assets at the time your debt was settled or deemed non-collectable

2.  Bankruptcy - the debt was already discharged through a bankruptcy proceeding

3.  Indebtedness due to certain real property business losses

4.  Indebtedness due to a qualified farm expense

5.  Discharge of your debt was treated as a gift (extremely rare)  

Most short sale clients fall into the insolvency category.  If you are insolvent, you must inform the IRS by completing IRS Form 982:  Reduction of Tax Attributes Due to Discharge of Indebtedness and include with your individual tax return in the year you receive the form 1099-C.  You are insolvent if your liabilities exceed the fair market value (FMV) of your assets immediately before the discharge.  For details, get Pub. 908 from IRS.

When do I need to file a Form 982?

File Form 982 with your timely filed federal income tax return (including extensions) in a year a discharge of indebtness is excluded from your income under section 108(a).

This information is provided for your information only and is not intended to be a tax or legal opinion. 

Do I need a real estate short sale?

If you owe more than your home is worth and you need to sell your home, please contact us regarding our short sale services. Contact us with any questions by phone at:

858-320-0405 Mon - Sun 8:00 am - 8:00 pm Pacific.

How do I stop the collection companies and lenders from calling every day?!

We have a unique "cease and desist" alternative that prohibits the lenders and collection companies from contacting you.  Please contact us to learn how to get these annoying collection agents off your back.