Short Sales – Questions and Answers

Short sales are on the rise across California. Many people are becoming affected by it either directly or indirectly. To help give you a better understanding of short sales I have interviewed Chris Plumb who holds a California Real Estate Brokers License.

Tell me a little bit about yourself?

“For the past sixteen years I’ve served as a Mortgage Underwriter, Mortgage Loan Processing Manager, Residential Property Manager, Realtor, and Real Estate Broker. I’ve dedicated many hours to educating myself as a knowledgeable real estate professional. In today’s difficult real estate crisis it’s vital to have the knowledge to properly service homeowners and future homeowners. In 2009 I received the CDPE designation (Certified Distressed Property Expert). A CDPE is trained to help homeowners who have a mortgage in distress. In 2002 I received my B.S. degree in Business Management from the University of Phoenix. Because of the education I’ve received, I’m equipped to help clients with their immediate, short-term, and long-term real estate needs. High levels of customer service are important to me, and I strive to ensure that each individual benefits from my experience.”


What is a short sale?

“A short sale is when a lender is willing to allow a homeowner to sell their home for less than what they own on their mortgage.”


Why is there currently a rise on short sales in California?

“Short Sales in California are on the rise because of unemployment and adjustable rate mortgages. Until companies have the ability to employ new people, we will continue to see more short sales in California. But what is more alarming is the amount of adjustable rate mortgages that are due to adjust. During the real estate boom investors thought it would be a great idea to loan money to people for less than interest only payments. These loans were called pick-a-payment or option ARM’s loans. Basically a homeowner could pay less than interest only on their mortgage.


If a homeowner is paying less than interest only, the amount that would have been paid with an interest only payment then has to be placed on top of the loan balance. In most cases a lender will only allow this type of payment to be made for 5 years and then the payment skyrockets. Well…the rockets are going to burst in 2010 like fireworks on the 4th of July. Wells Fargo who bought Wachovia who bought World Savings currently has over 4,000 loans alone in the Sacramento region that is currently in trouble. It is projected that 14,000 loans in the Sacramento region with Wells Fargo alone will need a loan modification or short sale. As the Team Leader of Connect Realty Fair Oaks, I have prepared my team to assist homeowners who are in distress and we are aligning ourselves with Wells Fargo to assist these homeowners and other homeowners.”


Other than losing their home are there any other personal drawbacks?

“If a short sale is not property negotiated by a Real Estate Profession, a homeowner may be stuck with the difference between the amount due and what the amount the home sells for. In many cases a Real Estate Professional can negotiate with the lender that the lender waives their right to collect on the difference. It must be clearly stated on the short sale approval letter from the short sale lender that they waive their rights to the difference. If it does not state this on the approval letter, the lender has the right to collect on the difference.”


“In most cases the homeowner will be sent a 1099 for the difference. A homeowner needs to consult with a CPA or Tax Attorney to see if there will be tax implications.”


Can one person’s short sale negatively impact the surrounding community?

“A person’s short sale can have a negative impact on the community if the short sale lender sales the home for less than current market value. In most cases the short sale lender will not allow a short sale to be sold for less than 5% of the current market value.”


What can people do to avoid a short sale?

“A homeowner can avoid a short sale if their lender is willing to modify their mortgage by reducing their interest rate. Lowering the homeowner’s interest rate will reduce their mortgage payment. If the payment is manageable, the homeowner may be able to afford the new mortgage payment.”


Can anyone benefit from a short sale?

“Only a person in financial distress can benefit from a short sale. A loss of job, a divorce, and a loss of income qualify for a financial distress. If a homeowner is merely upside down on their home and can afford their mortgage payments, they don’t usually qualify for a short sale. Always consult with a Real Estate Professional who is trained to handle short sales to see if you can benefit from a short sale.”


Any advice for anyone who is facing a short sale or investing in one?

“My advice to someone who is facing mortgage distress is to consult with a Real Estate Professional that has earned a designation to assist distressed homeowners. I highly recommend working with a Real Estate Profession that holds the designation of CDPE (Certified Distressed Property Expert).”


For more information about short sales visit The Plumb Team website.