That is the one question we are asked every single day.  Homeowners are confused with their options (or in some cases, their lack of options), and are unsure of what to do, and where to turn.  Most homeowners don’t realize it is simply too complex a question to be able to answer with a yes or no.  On many online forums however, it is exactly what I see many real estate agents do.  When the question is asked “Should I do a short sale? Or should I foreclose?” … many agents chime in with the advice “Do a short sale, its the best thing for your credit.”  “Do a short sale, it is better than a foreclosure.”  “Do a short sale, its the right answer.” 

First, let me tell you.. if you ask that question (short sale vs foreclosure) and one of the above answers is the first thing they say – run!  Run away.  The fact is there is no one answer, no one size fits all answer that is.  It is too complex. 

If you asked me that question… I’d likely answer “it depends.”   My second part of the response would be to advise an attorney and/or CPA.  There are too many variables to be able to answer that question with yes or no.  Fact is, sometimes a foreclosure is best for some people with certain situations.  In some cases, a short sale opens you to liability you may not have had otherwise.  There are cases that there was an entire strategy that could’ve protected you, but you didn’t know about because you did not consult with an attorney.

I can guarantee you that there will be many confused and shocked people this year.  These will be the people who did a short sale during 2008 and thought they were “done.”  But when you get your 1099 , what will you do – you know you can’t ignore that right?  Or worse, what happens if you DON’T get a 1099 (especially on a second loan or equity line of credit)…. ?  Have you received your collections or lawsuit notice yet?  It may be coming.  To add insult to injury, many don’t know that the state is not doing the same tax relief as the federal government.  You may have a state tax liability.  As mentioned above, on some loans, you may owe the deficiency balance.  On some, you may have turned the entire debt (on your first and second loans) to a collectable balance.  How’s that for shocking?

So, as you can see… if anyone says a short sale is automatically the right answer for you without a) telling you it depends and gets more information about your situation and b) insisting you talk with an attorney and/or CPA immediately… you may find yourself in trouble you never expected.

Seek counsel with professionals experienced in short sales.  That is another post.  How do you know if the REALTOR you are interviewing is REALLY knowledgeable in short sales?  There are many agents doing short sales, that in my opinion, have no business doing them.  I’ll tell you in another post some warning signs, and what to ask when interviewing agents to sell your home if a short sale is determined to be your best option.  First of all, do they have references of satisfied short sale clients?  How about testimonials from fellow realtors who worked with them in a short sale transaction?

Call the Contra Costa Short Sale Specialists

Catherine Myers & Terry Osburn
Alain Pinel Realtors
http://contracostashortsales.wordpress.com

http://www.DiabloValley.net

925-683-2125

We serve clients wishing to sell their homes in Walnut Creek, Pleasant Hill, Martinez, Lafayette, Orinda, Moraga, Alamo, Danville, San Ramon, Dublin, Pleasanton, Livermore, Concord, Clayton, Bay Point, Pittsburg, Antioch, Oakley, Brentwood and Discovery Bay.   If you are out of our immediate area, it’s likely we can provide you to a reputable short sale agent in your area.  A reputable agent will be one to have resources for you – homeowner help information, attorney and CPA contact information.  Have you exhausted all efforts to save your home?  That should be priority number 1 – and we can provide you some local resources of homeowner preservation (non profit) groups who can help you explore your options with your lender: loan modifications, etc.

Below is a semi-recent list of Loss Mitigation Department contact numbers.   Use these with a grain of salt.  Many of these organizations are so large, these may not be the right numbers to call for you.  They could however, be a good place to start.  Take note however . . . if you are late on your loan, surely you’ve started receiving notices from your lender or bank.  They may be offering a work-out program, forbearance, a deed in lieu or information on how to start preparing for a short sale.  The best thing to do is to call the contact information provided on that letter.  Open communication with your lender is the best place to start if you’re finding it difficult or impossible to keep your payments up to date.   Once they file an official notice of default, your clock starts ticking toward a trustee sale and its important that you exhaust all efforts to work it out with your lender.  Many homes in neighborhoods we research are owned by banks, yet NEVER went up for sale.  Don’t give up.. there are options to avoid foreclosure, but don’t wait to do something about it.