Foreclosures
Santa Clarita foreclosures are a hot topic these days, and whether you’re a buyer, a seller, or you just can’t make your mortgage payments any more, you may be impacted by the number of foreclosures or short sales on the market at any point in time.
Santa Clarita Realtor® Linda Slocum is a Certified Distressed Property Expert (CDPE) specializing in foreclosures and short sales. You can reach her at (661) 670-0349 or email her at Linda@SantaClaritaRealEstateBlog.com
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Foreclosure Home Search
Find Santa Clarita foreclosures and short sales using the search below, and we can show them to you and negotiate the best deal for you!
Sellers Facing Foreclosure
For Santa Clarita home sellers, there are some tough decisions to be made, as market values have dropped from their peak and much of the competition is made up of distressed properties (also known as foreclosures, preforeclosures, short sales, bank-owned homes, or REOs) that are priced below the current market value for the area.
The first steps for a seller are to verify your loan balance(s) as compared to the current market value of similar homes in your neighborhood. Verify your loan payoffs by either calling your bank or checking you last mortgage statement. You can do some preliminary research on your home’s value by searching for homes just as if you were a buyer. Comparing your loan balance to your home’s current market value will let you know whether it’s possible for you to make a profit on the sale of your home, or if you are potentially upside-down on your home, where your mortgage balance exceeds your home’s current value.
Options available for sellers facing foreclosure include loan modifications, forbearance (where the bank puts payments on hold for a few months), short sale (selling your home for less than the amount owed with your bank’s approval) and foreclosure (the bank takes back your home). Of these options, sellers who want to keep their homes should request a loan modification or a forbearance from their bank(s) first. If the bank won’t offer terms to your satisfaction, then your next option should be to consider a short sale, since it has far less impact on your credit report than a foreclosure does.
» IMPORTANT: Don’t wait until your foreclosure auction date is right around the corner before seeking assistance. Both loan modifications and short sales take time to process, and you’ll need to get these started early enough for the bank to postpone the foreclosure auction date. With a short sale, you’ll need to both list your home for sale and provide the bank with an offer from a qualified buyer before they’ll postpone your auction date.
Click Here for more information on short sales.
Upside Down Sellers
If you find that your home’s current value is less than your mortgage balance(s), then you’ll need a Realtor® with special training to help you get your home sold since this can be a complicated issue to resolve. In this situation, you’ll be requesting what is referred to as a ’short sale’ on your home, where the bank will be asked to accept an amount that is less than your mortgage balance as payment in full. See the section on Short Sales below for more details on this type of sale.
If you find that you do have some equity in your home (your home’s value exceeds your mortgage balance), then you’ll still need a little breathing room to cover normal closing costs if you want to at least break even on the sale of your home. Closing costs may include commissions, escrow fees, title insurance, payoff fees to your banks, HOA transfer fees, delinquent property taxes, and prorations of property taxes and HOA dues. A qualified Realtor® can help you calculate both your home’s estimated value as well as your estimated closing costs and your net cash from the sale of your home. If you find that you don’t have enough equity to cover your closing costs, then a Short Sale may be something for you to consider as well.
Click Here for more information on short sales.
Sellers and Bankruptcy
If you’re a seller considering bankruptcy, timing may be everything when dealing with your home mortgage as well as other debts. Most banks will not negotiate loan modifications, forbearances, or short sales with sellers in bankruptcy, so many attorneys will recommend filing bankruptcy after issues with your home have been resolved. In fact, many title companies will not allow escrow to close on the sale of your home if you have filed bankruptcy, since they may not be able to guarantee clear title. This means that either your loan modification must be complete or you must have closed escrow on your short sale before initiating any bankruptcy filings.
In the case of a short sale where the bank requires a ’soft note’, or unsecured note, to be signed by the sellers to finalize the bank’s short sale approval, many attorneys have reported that these soft notes will be discharged in bankruptcy as long as the bankrupcty is filed after the short sale is complete.
If you are considering filing bankruptcy, be sure to check with both your Realtor and your attorney before proceeding, as it may impact your ability to get bank approval for a loan modification or a short sale. We are not attorneys – the information contained herein is not to be considered as legal advice.
Short Sale Sellers
With a short sale, you will market your home for sale with the help of a qualified Realtor®, but you will need the bank’s final approval before opening escrow since the bank will be getting paid less than what they are owed on your mortgage(s). This process does take patience and a lot of paperwork, but in the end it will have a lot less impact on your credit report than a foreclosure would, and it allows you to remain somewhat in control of your move-out date.
Banks will typically pay all standard fees and costs associated with a short sale, including real estate commissions, delinquent property taxes, escrow fees and title fees. Short sales are typically sold ‘as-is’, with neither the sellers nor the bank paying for any repairs or modifications. Also, short sale sellers can never receive any money from the sale, so expect to have your mortgage eliminated without receiving any money in your pocket as a result of the short sale.
With a short sale, your credit report typically will show that your mortgage has been paid in full for less than the balance owed, which is far less damaging than a foreclosure. Experts say that FICO score reductions will be around 75-125 points for a short sale, vs. 200-280 points for a foreclosure. Also, with a short sale you may be able to purchase another home within about a year and a half, where with a foreclosure you may have to wait as long as three years.
To qualify for a short sale, you’ll need to present financial information to your bank to show that you have some sort of financial hardship that makes it so you cannot pay your mortgage. Typical hardships include the loss of a job or a business failure, a change in your family situation (death, divorce, separation), relocation, illness in the family, military service, or too much credit card or other debt. Your Realtor® will be able to walk you through the required paperwork to document your financial situation and an explanation of the hardship that you are facing for the bank to review.
Short sales are not for inexperienced Realtors®, as they do take an abundance of paperwork, special processing, and lots of time waiting on hold with the bank before the bank will issue their approval for the short sale to move forward with a qualified buyer. An improperly prepared short sale package submitted to the bank may create unwarranted delays in processing or an outright denial of the short sale.
Be sure to use a Certified Distressed Property Expert (CDPE) as your short sale Realtor® for peace of mind and an easier process overall. Santa Clarita Realtor® Linda Slocum is a CDPE with plenty of short sale experience, and will be happy to discuss your needs with you. You can reach her at (661) 670-0349 or email her at Linda@SantaClaritaRealEstateBlog.com.
Click Here for more detailed information on the Short Sale process.
Loan Modifications
A loan modification is a temporary fix to assist with changing financial situations. It is not a long-term fix, nor a gift from the bank to reduce your mortgage balance to the current market value.
You’ll need to show some sort of recent financial hardship in order to qualify for a loan modification, such as temporary disability, a reduction in income, a change in family status, mandatory relocation, or similar situations that would affect your family’s income.
Loan modification programs include the HOPE for Homeowners program, which reduces your total mortgage balance, and agreements to reduce your interest rate and pay back any missed mortgage and property tax payments.
Be aware that although the HOPE for Homeowners program reduces your total mortgage balance, it is not a freebie or a gift from the bank. With this program, the FHA will own a portion of your home, including a portion of your future equity increases.
Click Here for more information on Loan Modifications and the HOPE for Homeowners program.
Foreclosure Buyers
Foreclosure buyers are looking for bargains, and sometimes bargains are up for grabs in the Santa Clarita real estate market. Be aware, however, that not all foreclosures are bargains, whether they are bank-owned (REOs) or short sales (preforeclosures).
When shopping for foreclosures, be sure you are ready for some competitive bidding as well as some wait time before you’ll know if your offer is accepted or not. With REOs, the bank will typically give you a response within a week or less. With short sales, bank approval can take a month or more.
Also, be aware that not all costs that typically are charged to the seller are guaranteed to be covered by the bank in an REO or a short sale. The bank may refuse to pay for any of the reports required by your lender, such as termite reports and natural hazard (NHD) reports, which means that they will need to be paid by you, the buyer. The bank may not cover your first year’s home warranty either, but you can purchase that on your own through escrow. A home warranty is highly recommended with these properties, since there is little to no recourse available to you if something breaks down shortly after you move in.
The condition of REOs and short sales can range from recently cleaned with new carpet to completely trashed and missing essentials like sinks, toilets and appliances. Most REOs and short sales do need some work, but there are always a few out there that have been well taken care of and are ready for you to move in. If you find a home in need of work and you’re planning on using FHA financing, you’ll need someone who is up-to-date on ‘fix-it’ loans that will allow you to finance the repairs into your mortgage. Otherwise, the home will need to be move-in ready before your FHA loan will be able to fund, meaning that everything must be safe and functional but not necessarily gorgeous. Since neither the seller nor the bank are likely to cover the fix-it costs, it will be up to you as the buyer to cover them.
It’s best to be prepared to submit an offer on a foreclosure or a short sale as early as possible in hopes of getting a jump on the competition from other buyers. Since there are so few homes currently available for sale in the Santa Clarita Valley, many homes are receiving offers from multiple buyers within the first few days after they’re listed for sale. Being prepared means being ready to make a decision, as well as having your financial ducks in a row.
Be ready to provide your Realtor with a copy of your loan pre-approval letter as well as copies of bank statements to show that you have enough funds to close escrow, as these will need to be submitted with your offer. You may also be required to qualify with the seller’s lender prior to submitting an offer.
To find foreclosures and short sales currently available for you to purchase, use the Foreclosure Home Search tool above.
When you’re ready to get serious about finding a foreclosure or short sale to buy, it’s best to contact a qualified Realtor® who can help you with both listed and not-yet-listed homes for sale. Santa Clarita Realtor® Linda Slocum is a Certified Distressed Property Expert specializing in short sales and foreclosures. You can reach her at (661) 670-0349 or email her at Linda@SantaClaritaRealEstateBlog.com.
