The current San Diego real estate market has seen homeowner's "upside down." In other words, the value of the property is less than what is owed on the property. When this happens, a short sale may be necessary.

A short sale occurs when a lender agrees to reduce the debt on encumbered property; the owner then sells the property for an amount equal to or slightly more than the reduced debt. Example: T bought a home for $660,000, subject to a $500,000 nonrecourse debt owed to L. The value of the home has declined to about $420,000. L agrees to reduce the outstanding principal obligation to $420,000. T then sells the house to B for $423,000. T keeps $3,000; $420,000 is paid to L.

A short sale avoids a default on the loan that could adversely affect the taxpayer's credit. It is also advantageous to the lender since it motivates the owner/debtor to keep the property in good repair in order to find a buyer (rather than neglecting and then walking away from the property).

The Law Office of Harold D. Thompson can guide you through the short sale process. Contact our office today.