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1 What is a short sale? Simply put, a short sale occurs when a lender agrees to take less than the amount that is owed on a piece of property. The benefit of a short sale occurs when your net proceeds from a short sale are insufficient to cover your loan balance, but the lender agrees to take a lesser amount. A successful short sale includes the lender forgiving any remaining loan balance, clearing you from any future contractual obligations to the lender. 24/7 Real Estate provides short sale counseling and services to any homeowner in the state of California at no cost. Total Loan Balance: $400,000 Your Home is Worth: $220,000 You are Upside Down: $180,000 24/7 Real Estate negotiates with your lender and successfully sells your home for $218,000. Loan Balance After Successful Short Sale: $0 We at 24/7 Real Estate can identify and implement the best possible Short Sale solution, which will help you avoid foreclosure. Our counseling and short sale services are provided at no cost. Once we have reviewed your situation we will negotiate with your lender to come up with a solution. Our purpose is to secure a fair agreement with your lender. Speak to a counselor today: 1(866) What is the short sales process? To obtain a short sale in California, you must use a licensed real estate agent or company. This must be someone who has experience and knowledge in short sale negotiations. The good news is that we have a team of agents and negotiators at 24/7 Real Estate Short Sale Solutions that are licensed and will do this for you at no-cost. How is this possible? The lender pays the listing commissions when your property is sold, and while the short sale process is occurring you are allowed to stay in your home.

2 Step 1: Determine if a Short Sale is Right For You. Give us a call at and we can determine if a short sale is your best option. Step 2: Obtain Required Documentation Most lenders require specific documentation, and they don t all require the same thing or use the same forms. Normally the first required document is a hardship letter, which is sent to the lender and explains why a borrower can no longer afford their monthly mortgage payments. The documents are gathered and sent as a package to the lender. Step 3: Market the Property We market the home to potential buyers through various channels. You are allowed to live in the home during the short sale process. Step 4: Negotiation of the Short Sale Once there is an offer on your property, we submit the offer and paperwork to the lender and negotiate the deal. Negotiations can be tedious and take time. It s best practice to continue to market your home and get backup offers because if your first offer was not high enough, the lender will counter and tell you they need a higher offer. An ideal offer is one that is close to the appraised value of the house.. Step 5: Finish the Transaction If the offer is in the neighborhood of the appraised value, most likely the lender will green light the deal. The next and final step is to begin escrow and close the transaction. How will a short sale affect my credit? The main advantage of a short sale is not having a foreclosure on your credit report. Short sales may still show up on a credit report as a pre-foreclosure in redemption status. Although this can result in a credit score reduction of 100 points or less, a foreclosure will usually reduce your score by more than 250 points. According to Fannie Mae, an individual that forecloses must wait 5 to 7 years, maintain at least a 680 FICO score in the last 2 years, and pay a minimum 10% down on a future home purchase. We have seen customers purchase a new home in as little as two years after their previous short sale.

3 What are the qualifications for a short sales? The main qualification for a short sale is that you owe more on your home loan than what your home is worth. Secondly, you must be suffering some sort of financial hardship. Many lenders have dropped the required hardship explanation, however. Financial hardship can include many things, such as: Loss of employment or reduced hours Major illness or medical expenses Divorce Increased bills Higher living expenses Investment Loss Changing loan terms Concerning loan terms/high interest rate Inability to save for retirementt Increased anxiety While some lenders do not requiree a hardship explanation, other lenders will requiree at least some explanation of why you cannot pay your mortgage. Our experience is that ALL lenders have very lenient rules about what they consider to be a hardship. Give us a call at and we can discuss what type of hardship requirements your lender has, and what you can do if you think you do not have a valid hardship. A common misconception about short sales is that you have to be out of money to qualify. Having cash savings in the bank, or even situations where you are currently making more money than you have in the past will not necessarily disqualify you from a short sale.

4 How are our services no-cost to the homeowners? By representing you in the short sale process for your home, the lender will pay the listing commissions we earn working to sell your property. All closing costs, unpaid taxes, commissions, and secondary lien payoffs are negotiated to be paid out of the closing proceeds. This means there is no-cost to the homeowners. Is a second mortgage forgiven in a short sale? A second mortgage or home equity line of credit is negotiated to be settled during the short sale process, so any debt from these would be forgiven. California law SB 458 benefits homeowners who wish to pursue a short sale and have a second mortgage or home equity line of credit. With a foreclosure, California law allows lenders to attempt collection or freezing of assets for the amount of debt from a second mortgage or home equity line of credit. When a homeowner completes a short sale, all second mortgage or home equity line of credit debt is considered forgiven, which means the lender cannot pursue you for any unpaid debt. Can I do my own short sale? No. In California, you need a licensed and experienced broker to perform a short sale. Most Real Estate Agents do not have the knowledge or skilll to perform a successful short sale. 24/7 Real Estate Solutions has a fantastic success rate and a reputation for being the best in the industry. How long does it take to complete a short sale? Varying from lender to lender, it can take two weeks or as long as 60 days to receive an approval of a short sale from a lender. Even with an approval, it may take 2-4 months for the home to be sold. During the short sale process, you are allowed to live in the home. It is imperative that the process gets started as soon as possible. DO YOU OFFER THE HAFA PROGRAM? Yes! 24/7 Real Estate has industry expertise with the Home Affordable Foreclosuree Alternatives (HAFA) program. With the HAFA program, you may receive up to $3,000 for relocation expenses. The HAFA program is sponsored by the federal government and is intended to assist lenders and homeowners by streamlining the short sale process. It was developed to help homeowners settlee their mortgage debt to avoid going through a foreclosure. When the program was implemented in 2010, numerous complaints were heard industry wide about the feasibility of obtaining help through the HAFA program. The problems were so

5 big in fact, that it s brother, the Home Affordable Modification Program (HAMP), is considered a complete failure. The good news is that recent policy implementations have loosened the HAFA program requirements for distressed homeowners. If you do not meet eligibility for the Home Affordable Foreclosure Alternatives program, other programs with similar benefits can be available to you. Call one of our advisers toll free at to explore your options. Some of the qualifications are: Your home is worth less than what you owe to the lender Your current mortgage was taken out on or before January 1, 2009 You are experiencing a hardship and cannot afford your current monthly payment The home is your current principle residence OR the property has been rented out or vacant for less than 12 months You are more than 60 days late on your mortgage payment You have cash reserves lesss than $5,000 or less than three times the current mortgage payment You are not less than 60 days from a foreclosure sale date HOW WILL A SHORT SALE AFFECT MY RETIREMENT? A common question among homeowners is how a short sale can affect retirement savings. People believe that this is a complicated question, but the simple answer is that when a short sale is completed, the lender is not allowed to pursue any monetary actions against the seller for the balance that was owed. Current laws forbid banks from pursuing money after the deficiency has been settled through a short sale. This means that any IRA, savings or other funds are completely protected. Any other properties you may own, including rentals, properties with equity, are also protected. If you have any further questions regarding retirement and short sales, give us a call at

6 What are the income tax ramifications? Because every short sale situation is unique and complicated, there is no single answer for an individual who wishes to short sale their home. Current California laws and statutes protect most homeowners from any federal or state taxes when performing a short sale. We have an exceptional understanding of all current tax laws and will gladly answer any questions you have when you call us at One important factor in the tax implications of a short sale is the Mortgage Forgiveness Debt Relief Act of The act generally allows the homeowner to not have to pay federal income tax on debt forgiven through a short sale. Furthermore, the anti-deficiency provision of Code of Civ. Proc. 580e states that since short sale debt is considered non-recourse, it is not considered taxable income to the IRS or California Franchise Tax Board. What is the Mortgage Debt Relief Act? Updated January 2014 The Mortgage Forgiveness Debt Relief Act is a government bill that offers relief to most homeowners who would normally owe taxes on the forgiven debt after performing a short sale. The Act became law in 2007, and benefits both lenders and borrowers. Under previous US law, when debt is forgiven by a commercial lender (Bank of America, Chase, US Bank etc.), that debt would normally require the borrower to include that amount as taxable income on tax returns. This would normally have caused the borrower to have to pay taxes on their forgiven debt. With this act in place, a borrower DOES NOT have to pay income tax on forgiven debt in most cases. Laws and guidelines provisioned in California during 2013 preemptively protect California homeowners in case the MDRA expires. For example, if the lender forgives $50,000 of debt to the homeowner after the completion of a short sale, under current tax laws that $50,000 is considered income. If your combined federal and state marginal tax rate is 25%, you would then owe $12,500 in taxes. Under the Mortgage Forgiveness Debt Relief Act, you would be allowed to exclude from income the discharge of debt, and therefore not have to pay the taxes associated with it. The Mortgage Forgiveness Debt Relief Act is set to expire December 31, 2013, but there are currently two bills in the House and one in the Senate that call for an extension. Because of the uncertainty of the future of the MFDRA, California lawmakers passed statutes and laws in 2012 and 2013 that still protect homeowners against state and federal taxes. Read below for more details.

7 California Senator Barbara Boxer recently clarified with the IRS that under Californiaa law, those who perform a short sale on their primary residence are assured that no federal tax penalties will be incurred even if the Mortgage Debt Relief Act Expires. Technically speaking, under the anti-deficiency provision of Code of Civ. Proc. 580e, the debt would be a non-recourse obligation, and for federal income tax purposes the homeowner will be considered not having COD income. Furthermore, the California Franchise Tax Board also states that distressed California homeowners who short sale are protected against any state income tax when the sale of the home is completed. For more information and details about exemptions, please call us at If your tax lingo is up-to-date, you can read more about how the IRS and California deal with short sale debt at the California Franchise Tax Board website. Can I still short sale if my home needs repairs? Yes. Extensive repairs will be reflected in the list price and will be considered by potential buyers. Can I do a short sale if I have a second mortgage? Yes. Part of the short sell negotiation process is to make sure the debt of the second mortgage is forgiven. Even if you have two different lenders, it is more beneficial for the subordinate lender to settle with a short sale. If a property goes to foreclosure the second lender normally gets nothing. Can I short sales a rental or vacation property? Yes, it is possible to short sale a rental property or non-owner occupied property, which also falls into the same category as vacation homes and vacant homes. This type of short sale is treated slightly different than an owner occupied short sale, but the same basic short sale procedures apply. If you currently have tenants, one of the main differences between an owner occupied property and rental property are the rules and notifications you must give tenants if you wish to evict them before the short sale occurs. If your tenants are on a month-tothe property for over a year. month lease, they must be notified at least 60 days in advance if they have lived in If they have lived in the property for less than a year then they require 30 days notice. If your tenants are interested in purchasing the rental property themselves, they allowed to as long as they qualify for a loan or have cash to purchase it outright. If your tenants are family members or relatives then they are not allowed to purchase the property outright. Some property owners wish to allow their tenants to continue to live in the property even after the short sale completes. This is entirely possible and we have a network of investors who could purchase the property and rent it to the same tenants that live there now.

8 Covering negative rent, your rental not making a profit or your rental needing repairs are all common reasons why an owner may wish to short sale their rental property. Every short sale situation is unique and complex. Because of this, it is important to talk to a qualified expert to ensure that you are aware and understand possible income tax owed in certain situations and some of the rules involved if you have tenants. Can I short sale if I have an FHA loan? Yes. Short sales with loans acquired through the FHA program are almost identical to short sales performed with normal lenders. In our experience, the main difference between the two is that the use of an investor to purchase the property is nearly impossible. The Federal Housing Administration almost always requires the selling price of the home to be the appraised market value. What are the short sales benefits? There are many benefits and seasoned programs to help distressed homeowners who wish to pursue a short sale. Programs sponsored by federal and state governments, as well as the lenders themselves may offer relocation assistance to qualified homeowners. Laws created over the past few years also protect homeowners from what were considered the negative aspects of short sales in the past, including taxes and deficiency judgments. Some of the benefits for short sales selling your property? 1. HAFA is a government sponsored program that is offering up to $3000 for homeowners wishing to short sale. 2. Lenders are offering monetary compensation for homeowners who short sale. The major lenders who settled a lawsuit, including Bank of America, Chase and Wells Fargo are offering some homeowners up to $30,000 for short selling in certain situations. Other lenders offer different benefits. 3. All costs associated with performing the short sale are paid by your lender. This means there are no out of pocket expenses for you when you perform a short sale. 4. By law, all mortgage debt is considered forgiven. This means that your lender cannot come after you for any remaining mortgage balance. 5. The Mortgage Debt Relief Act, which expires at the end of 2013, allows you to avoid paying taxes on a short sale. 6. You are allowed to live in the home until it is sold.

9 How can I avoid short sale scams? Tactics are being used by unethical short sale agents who are preying on the vulnerabilities of distressed homeowners. The most prevalent of these tactics is instant short sale flipping, whichh is known in the industry as short sale flops. In a basic sense, a short sale flop occurs when an agent hides legitimate offers from buyers put in on short sale property. Instead, they tell the homeowner the house is not selling, but they have an investor who is willing to make an all cash offer for less than market value. The home is sold to the investor, who instantly sells it to one of the original buyers that put an offer in on the home previously. The short sale agent makes double commissions, plus takes a cut of the profit made by the investor. The biggest red flag for an unethical short sale agent is one who does not keep you informed, and refuses to let you know when offers have been submitted. It is also important that the agent works for a company that disallows this type of activity. Also be aware of any agent or company who requires money upfront, as this is illegal. Investors should only be consulted by the short sale agent if the property is unsellable due to its current condition or uniqueness, or the home has an upcoming foreclosure date that won t be postponed without a written offer. How can I avoid foreclose scams? Have you received a letter or phone call from a company claiming they can save your home from foreclosure? Were you told you have to pay a high fee, or pay upfront before any services are done? These are predatory practice signs and you need to learn how to spot them. Avoid any company who guarantees they can stop foreclosure immediately, makes you pay for counseling, or tells you to redirect your mortgage payments. Our short sale services, knowledge and real estate advice are always provided at no cost to the homeowner. What can I do if I have an upcoming foreclosure date? The first thing you should do is not panic. Secondly, you need to call us at Even if your foreclosure is one week or one day away, it may be possible to delay the foreclosure proceedings. Many people feel that when they receivee an NOS (Notice of Sale), all of their options are gone. This is not true. It is estimated that it costs lenders up to $60,000 to foreclose on a home, so most lenders would rather take a cheaper approach. If you are serious about stopping the foreclosure proceedings, the lender will be willing to listen as long as they see an effort on your side through professional assistance. It isi important to be aware of foreclosure scams and how to avoid them. A common mistake is that people will move out of the house with a looming foreclosure, but you willl lose some of your rights when you do this.

10 Why am I having problems with my current short sales? Many people who are using inexperienced companies and agents to short sale their home are finding their own short sale experience unsatisfactory. We receive many calls from people who feel that their current agent is not representing their best interests. There a few reasons why your current agent may not be the best person to short sale your home: A short sale transaction is much more complicated than a traditional home sale. Not only do real estate agents need to know current short sale laws and bank procedures, they need to have negotiation experience with the major US Banks. 24/7 Real estatee not only has full time and experienced short sale real estate agents, but also full time and experienced short sale negotiators. An inexperienced agent or company will cause delays, which will lead to a higher probability that the current buyer will back out or the bank will deny the short sale. It takes the bank between one week to three weeks to review paperwork, so you must be certain that the correct forms were filled out with the correct information. We at 24/7 Real Estate are here to help you. Let our experience, expertise and commitment work for you. We know you have may have a lot of questions and we are here to inform you and walk you through the process from beginning to end. We are at 24/7 Real Estate, never stop working for you.