The IML Real Estate Blog

You CAN do a Short Sale even if you are in foreclosure! 

Many struggling homeowners are unaware that they still have an opportunity to avoid foreclosure even if notice of default (NOD) has been filed. Several times a week I speak to people who have received or know someone who has received a Notice of Default (NOD) on their home (that is the documents that formally initiates the foreclosure process in California). Often it is clear that they believe that because they have already received a NOD, it is too late to try to save their credit and take advantage of the potential tax relief that a short sale may provide to them.

The fact is that you can already have a Notice of Default filed on your home and still take advantage of the benefits of short sale but it is important to fully understand the short sale process. In fact, if you work quickly, it is even possible do a short sale on your home even if a Notice of Trustee Sale (NOS) has been filed.  Mind you, I am not saying that I recommend that anyone wait for either an NOD or NOS to short sell their home but it is still possible to avoid foreclosure even after those events have occurred. Normally, as long as we can get a home listed and a short sale package that includes a legitimate offer submitted to the foreclosing bank AT LEAST a week before the sale date, we can usually get the sale stopped and the sale date pushed out at least 60 days so the bank will have time to process the short sale. I have had success getting a sale stopped with even less time but the more time there is, the more chance we have of getting the trustee sale pushed off and the short sale approved.

Banks do not want to own property. They are in the business of making money by loaning money, not owning and selling real estate. Because of that, if a short sale will net the bank even 1 dollar more than a foreclosure, they will usually approve it. The more time you can give my team or another experienced short sale team to get your home on the market, secure offers for it, and submit your complete short sale package to the lender(s), the better.

Typically a borrower/homeowner can miss at least 3 payments before a NOD is filed by the bank. After NOD the borrower has 90 days to cure the default (that is, pay all back payments and monies owed) or make arrangements with the bank to catch-up. If the default is not taken care of in those 90 days, the bank can file a Notice of Trustee Sale set for at least 21 days after the 90 day period.

If the homeowner/borrower does not bring the home current or make arrangements with the bank, the home will be sold, or attempted to be sold, on the courthouse steps for the amount owed. Most homes do not sell at the trustee sale because the homes are not worth what is owed on them. In these cases the properties revert back to the bank and become Real Estate Owned (REO). Usually, those homes are then listed by REO Listing Agents or are sold off to investors as part of BULK package sales.