The majority of people who buy a home need a mortgage or a loan. The home is yours, you pay the mortgage back over the life of the loan. When you sell the home you pay off the remainder of the loan… This is the case in about 50% of the sales in Sonoma County right now.
The remaining 50% is about 25% short sales and 25% foreclosures. The latter is quite often called ‘walking away’ from a home, the homeowner stops paying their mortgage and the bank forecloses… And in case when there are 2 mortgages against the home: the first ‘lien holder” (bank) forecloses, HOWEVER, the second ‘lien holder’ (bank) will pursue repayment…
This is the same in case of a short sale… A home owners sells their home, the bank agrees to take a loss. When there is a second loan, this bank needs to agree with the sale, and usually keeps the right to go after the difference… This CHANGED as of July 1st in CA… but ONLY for short sales. Per July 1st 2011, the 2nd lienholder cannot pursue the deficiency any more. This means, at time of closing you are DONE. You walk away from a very difficult situation and can start over again. See my blog posting a few months ago.
Bottomline, right now in CA, there is a huge benefit in pursuing the short sale option. Rather than ‘walking away’ it behooves distressed home owners to take action, contact their banks, their trusted Realtor, mortgage advisor, CPA. Going through the short sale process is more work, but it’s worth it.
It is my experience that not enough home owners know about the benefits of pursuing a short sale. Please spread the word and also feel free to contact yours truly.
Mirjam