Pasadena CA Real Estate Buyers and Sellers Understanding Short Sales

I think most people have a pretty good idea what a foreclosure is, but there's still quite a bit of confusion on what a short sale is.

Pasadena, CA - there's a lot of talk about "short sales" and foreclosures lately. It's in the news. Books are being published about short sales. There are even radio commercials talking about short sales.

I think most people have a pretty good idea what a foreclosure is, but there's still quite a bit of confusion on what a short sale is.

A short sale simply means that a bank is willing to accept less money than what the owner owes on the property because the house can not sell at a price high enough to cover the mortgage fully.

Here is a quick example:

Home was purchased for $500,000

1st and 2nd Trust Deed (mortgage) is $495,000

House is now worth $450,000

Bank agrees to accept $450,000 less expenses in leu of the full amount owed $495,000

Why would a bank agree to accept less than what is owed?

To avoid the costs and a lengthy process of foreclosure and further loss of home value.

Why would a Pasadena seller consider putting their Pasadena home on the market as a short sale?

In essence, you sell the house for whatever you can get and the lender agrees not to go after you for the deficit that is owed on the property. Even though your credit might be affected, it will not be to the same extent as a foreclosure.

Also the Mortgage Forgiveness Debt Relief Act of 2007 amends the IRS code to exclude from gross income amounts attributable to a discharge of the debt incurred to acquire a principal residence.

A short sale doesn't mean that it's a fast sale.

It's actually more of a long sale meaning it takes on average 3 to 5 months (depending on the bank) to close escrow on a short sale.

Why shoud Pasadena buyers consider short sales if it takes such a long time?

Simply said - to get a better deal.

There are not too many short sales homes available at this time in Pasadena. The Pasadena homes that are there are certainly worth exploring.

If I can be of any assistance with your Pasadena Real Estate needs, please do not hesitate to email me at Irina@Irina4RealEstate.com or call me at (626)627-7107. Thank you!