HELOC in a West Sacramento Short Sale

A client called us the other day confused. He had a first and second loan and owed more than their West Sacramento property was worth. He had refinanced and pulled money out to improve the West Sacramento property. In calling his bank to discuss a loan modification he found out that the second was not a true mortgage second but a Home Equity Line of Credit or HELOC as they are often referred to. He was surprised to find out that the bank would not consider a loan modification unless he settled the HELOC for a minimum of 20%. Now let’s face it, how many people have an extra 10 or $20,000 to give to their lender on a property already 50% upside down.

  

His question to us was, can he short sale in West Sacramento if he has a HELOC second and, if so what will it cost. Our answer was yes, you can West Sacramento shortsale with a HELOC second, have the debt forgiven and if done correctly, owe no income taxes on the forgiven debt.

You see HELOC’s are treated the same as credit card debt. If the West Sacramento property was foreclosed on you would still be liable for the unpaid balance of the HELOC second. This is why in most instances a West Sacramento shortsale is superior to a West Sacramento foreclosure.

On a HELOC second for the most part we have been very successful in getting the first to clear and the second to accept for about 6% of the unpaid balance with no cash contribution from the seller. In fact, without giving tax or legal advice, it is illegal for the second to require the seller to make a cash contribution or sign a promissory note in order to get the second to approve the West Sacramento shortsale.

Don’t let the HELOC second scare you. Properly done a West Sacramento shortsale will allow you to walk away from the debt, avoid tax liability for the unpaid balance and get a fresh start financially.

Call me today for a free no obligation consultation. Call me today and sleep better tonight; you’ll be glad you did