Short Sale News
Homeowners and agents alike need to be aware of potential short sale problems before beginning the short sale process. One of the biggest obstacles to a successful short sale can be junior liens. Junior liens are creditors that have a security interest in the property; however, their security interest in the property is subordinate to the primary lien holder. Junior lien holders can take many forms and include, but are not limited to, Home Equity Lines of Credit (“HELOC”), stand alone second liens, mechanic’s liens, judgment liens, tax liens, etc. It is extremely important that both a homeowner and their real estate agent be aware of the existence of any of these prior to beginning the short sale process. Short sale problems start when an inexperienced real estate agent does not investigate the homeowner’s title prior to beginning the short sale process. In a short sale, junior lien holders are typically out of position and are unable to recover any money arising from their security interest in the case of a foreclosure. Junior Lien holders’ power arises when the homeowner wants something from them, such as short sale approval. Junior lien holders will use this empowerment as an opportunity to try and recover as much money as possible. California law prohibits lien holders that agree to a short sale from pursuing a deficiency after agreeing to a short sale. Thus, a Junior Lien holder has the opportunity to either negotiate a full settlement of the account or push the homeowner into a foreclosure and, in the case of recourse liens, pursue the homeowner in an attempt to recover a deficiency judgment. Most Junior Lien holders will negotiate and although they will not always accept the exact amount allocated by the first lien short sale approval, they will put a number on the table which is acceptable to them. Since the homeowner needs clean title in order to complete a short sale and since the junior lien holder has the power to prevent the short sale from being completed by not agreeing to the short sale, homeowners desiring to short sale need to negotiate with these junior lien holders. More problematic are judgment and IRS and state tax liens. These liens must be resolved in order for a short sale to be completed. It is important that homeowners seeking to short sell their homes secure the services of a real estate professional that is capable of handling complex transactions. Once a homeowner has retained a real estate professional to assist them on their short sale it is extremely important that the homeowner disclose any issues that might affect the sale of the property. If properly disclosed, the real estate professional will have time to try and find resolutions instead of finding out about an IRS tax lien at the 11th hour and facing a trustee sale. Homeowners and their real estate professionals are a team and need to work together in order to achieve the common goal of a successful short sale.
Jenny Winford July 23rd, 2017
Posted In: Uncategorized
SPS Short Sale
Michael Gaddis recently closed a SPS short sale at 1221 Via Mil Cumbres, Solana Beach, CA. Originally, the lender was Bank of America, however, the servicing of the loan was transferred midway through the short sale process to Select Portfolio Servicing (“SPS”). Due to the fact that the home was dated and had deferred maintenance obtaining a buyer was somewhat difficult. However, Michael Gaddis received an “all cash” offer that was on the low end of being a reasonable offer. Although the offer pushed the limits on reasonableness, the buyers were fully aware of all of the potential issues surrounding the property and were willing to take the property in AS-IS condition. Michael Gaddis made the buyer’s agent well aware that it was possible, and likely, that, if their offer was accepted SPS was going to counter them. The buyers understood and told Michael Gaddis that they were somewhat flexible in their number. Michael Gaddis advised the homeowners to accept the offer and it was quickly submitted to SPS for review. The negotiation process took some time due to the fact that, just as Michael Gaddis had predicted, SPS countered. The buyer and SPS went back and forth over the course of 6 weeks during which time the buyers substantiated their offer with quotes from contractors while SPS ordered an additional appraisal. Finally, the buyer and SPS agreed on $920,000 as a purchase price. Subsequently, Michael Gaddis and the buyer waited for the approval, which for some reason, despite an onslaught of pressure from Michael Gaddis, took longer than expected to procure. The day that the approval was procured Michael Gaddis contacted the buyer’s agent and was immediately told that the buyers were walking away from the transaction. The buyer’s agent did not have a reason why other than they were no longer interested. However, the buyer’s agent told Michael Gaddis that she had another buyer who was willing to purchase the property for the same terms. Michael Gaddis promptly notified SPS of the change of buyers and SPS began the process of re-reviewing the short sale file in order to issue a new short sale approval.
When the new approval was issued by SPS the buyer and seller quickly entered into escrow. Although the terms of the SPS short sale were for an all cash deal, the buyers decided to switch to conventional financing to take advantage of the low interest rates. This sudden change made Michael Gaddis feel a little uneasy because close of escrow was only 12 days away and a trustee sale was looming over the transaction. Michael Gaddis was not confident that SPS would extend the approval in order to accommodate the change in financial terms. The buyers agent assured Michael Gaddis that this change would not affect closing and true to her words, the transaction closed on Friday, November 30, 2012.
No short sale is without problems. Problems can arise due to a number of circumstances. The key to resolution is not to panic and to find a way to overcome the issues. Experience is key. Do not short sell your house without first obtaining an agent that you believe will truly be there for you throughout the process. Perform your due diligence and pick the right Realtor for your SPS Short Sale.
Jenny Winford July 23rd, 2017
Posted In: Uncategorized
Short Sale Attorney
I get numerous calls every week from homeowners that are in the short sale process that are having issues with the Realtor that is assisting them. I am always sympathetic to their position and constantly hear, “I wish I had found you before I chose my Realtor”. The truth is I wish they had as well because, if they had, they would not be experiencing the problems that they are contacting me about. There is not much I can do to help these homeowners except give them a little advice and knowledge and send them on their way. Ironically, I also get numerous calls from Realtors who are conducting short sales that are at impasses and are unable to address an issue that has arisen during the short sale process. In essence, they have bitten off more than they can chew and are seeking advice and guidance so they reach out to me for assistance. The bottom line is that while some short sales are very easy and will close without a fuss most short sales have problems or moments of crisis and the Realtor handling the short sale better have the knowledge and know-how to circumvent the obstacles that are sure to arise. The truth is, not many of them do so many of these short sales fail.
Most of the times homeowners that contact me prior to engaging a Realtor will choose me to help them short sell their properties. I am an obvious choice as I am more than capable of handling nearly any issue that may arise. As an attorney, real estate broker and mortgage broker my experience, knowledge and abilities set me apart from the average Realtor. Of course Realtors do not want to hear this and frequently tell homeowners that there is nothing more that an attorney/Realtor can do than they can or that they are better equipped to handle real estate matters than someone like myself. As you can imagine those statements are caused by insecurity and ignorance. Of course an attorney/Realtor is better equipped than a typical Realtor to handle short sales or any real estate sale for that matter. Real estate transactions are complex legal transfers of ownership consummated by a mountain of legal documents. As a homeowner, all things being equal, who would you rather have handling your transaction, a Realtor with a high school diploma and some college credits or an accomplished transactional attorney legally capable of advising you as to the contents and meanings of legal documents as well as properly structuring addenda and ancillary agreements.
Most short sale attorneys like myself do not charge any differently than average Realtors. Just like Realtors we are compensated at the end of the transaction from the proceeds of the short sale. So if a homeowner can get the services of a short sale attorney for no cost out of their pocket why in the world wouldn’t they?
Recently I had one potential client choose to use another Realtor instead of my services. Although the homeowner was impressed with my resume and abilities they were concerned that I was not local enough to properly assist them. The homeowner was located in Rancho Cucamonga which is a little more than an hour from my office. I stressed to her that I was ready, willing and able to assist her and that the distance should not be an issue. I also told her that she should be careful on who she retained to help her because her short sale was not going to be easy. She had 3 liens and the 1st lien was not a short sale as the proceeds of the sale would more than cover the 1st lien holder in full. I warned her that if a Trustee Sale date was issued by the 1st lien holder that an average Realtor would have a very difficult time getting it stopped. I assured her that not all Realtors are created the same and that, although she was worried about the distance, that should be an insignificant consideration in determining who to use for the short sale. In the end she chose another Realtor closer to Rancho Cucamonga because he told her 1) he had completed hundreds of short sales; 2) he was going to keep her very involved in the short sale negotiation and process; 3) that there was nothing an attorney/Realtor could do that he could not do; 4) that her short sale was a run of the mill short sale and that it should be easy; 5) that he and his Realtor had connections with the lenders that no one else had; and 4) that there was no one in California more qualified than he was. I told the homeowner that he was full of hot air, that the Realtor was selling himself and that, if he sold her, she would wind of regretting her decision to use him. I assured her that her short sale was not a typical short sale and that this Realtor was biting off more than he could chew. Despite my warnings she decided to use this Realtor due to his proximity to her house.
To make a long story short, on Friday of last week at 1:30pm I received a frantic phone call from the homeowner who told me that her house was going to sale at 2:00pm. She was desperate and wanted to know if there was anything I could do. I asked her what had transpired to bring her to this point. She told me that the short sale started off well but soon she began to notice that the Realtor was living up to his promises. His communication was lacking and even when she did speak to him he was not forthcoming with details. When the 1st lien holder issued a sale date the Realtor remained confident and told her that he was working with 1st lien holder’s short sale department and that the sale would get pushed back to allow for the transaction to move forward. The homeowner started to lose faith in the Realtor as the sale drew closer and closer. She told me that she remembered what I had said about this not being a normal short sale and that the1st lien holder could be difficult if a sale date was posted. As the sale date remained her tension increased and the Realtor’s confidence faded. When the homeowner discovered that the Realtor was using a 3rd party negotiator to communicate with the bank and was not directly involved himself, she said she swallowed her pride and called me.
I told her that I had warned her that the Realtor had oversold his abilities. I told her that it was too late for me to intervene at this point that the sale was in 25 minutes and that her fate now rested in the hands of the Realtor she had chosen. I also told her that if this Realtor or whoever was calling the lender on her behalf was asking the 1st lien holder’s short sale department to intervene that her house was surely going to sale. I reiterated that the proceeds of the sale were enough to completely compensate the first lien holder and that as far as the 1st lien holder was concerned, the sale was not a short sale. There was nothing that the short sale department could do. I told her that I believed her house was going to be sold.
Sure enough I was correct. The house did go to sale. The Realtor stopped communicating with the homeowner, that is until she demanded to see her short sale file. The homeowner also insisted that the Realtor provide her with the names of the vice presidents at the lender that the Realtor alleged to have contacted to help stop the sale. The Realtor refused to turn over the file or the names and insisted that if he and his office could not stop the sale then certainly no attorney could. The Realtor then ceased communication entirely. You can imagine why. He had bitten off more than he could chew and was now in defensive mode. He did not understand the complexity of the short sale and the homeowner was now paying the price. If she had used me that sale would have been stopped and the short sale would have been completed. To make matters worse, the 2nd and 3rd lien holders are recourse 2nd liens and now that the 1st lien has foreclosed they are free to pursue judicial remedies for amounts owed on their notes. If the short sale had closed properly the 2nd and 3rd lien holders would have been satisfied. The homeowner is now forced to contemplate bankruptcy.
The bottom line is that not all Realtors are created the same. If you are looking to short sale your home do yourself a favor and get a competent short sale attorney to represent you. Do not be sold by fast-talking Realtors that promise more than they can deliver or you may suffer the same fate as the homeowner in this situation.
If you are looking to sell your house please contact Michael Gaddis, J.D. of Michael Gaddis, J.D. Realty Group. Michael Gaddis is a real estate broker, NMLS licensed mortgage broker and licensed California attorney. Michael Gaddis, J.D. assists homeowners in San Diego, Orange and Riverside Counties with the sale of their homes. Michael Gaddis, J.D. charges no additional fee other than the traditional fees paid to a real estate broker but brings with him the knowledge and experience of a licensed California attorney. Call 888-242-2272 for a free consultation of your situation. To obtain more information regarding Michael Gaddis visit www.sdshortsaleattorney.com or www.michaelgaddis.com or www.californialoanmodificationattorney.com. To view sample of short sale approval letters obtained by Michael Gaddis for homeowners that have successfully short sold their home please click the following link: http://sdshortsaleattorney.com/approved-short-sale/
Jenny Winford July 23rd, 2017
Posted In: Uncategorized
Short sales are significantly more challenging to facilitate than traditional sales. The amount of work involved in processing short sales is exponentially higher due to the need to prepare, process and submit short sale applications and documentation as well as in the need to constantly communicate with the lender and respond to their requests for additional documentation, BPOs & Appraisals, etc. Short sales get even more problematic when junior lien holders are involved. Some junior lien holders (typically 2nd liens or HELOCs) are very easy to deal with and processing a short sale request with them is a mere formality. Lenders such as Chase, Bank of America and Ocwen are usually very easy to deal with. However, lenders such as RCS, Green Tree and PNC can be problematic. Typically, in a HAFA short sale the first lien holder will allocate up to $8,500 towards the junior lien holder in an effort to persuade the junior lien holder to agree to the short sale and release the lien. As mentioned, lenders like Chase, Bank of America and Ocwen usually agree to this amount and participate in the short sale. However, some junior lien holders want more money to agree to the short sale than the first lien holder has or is allowed to allocate. HAFA prohibits additional contributions to the junior lien holders above the maximum of $8,500. The prohibition includes contributions by the seller, the buyer or real estate agents. The bottom line is that if the junior lien holder is demanding an amount exceeding the HAFA cap, the seller will have to switch to a traditional short sale if the seller wants to consummate the short sale.
The reason that some of these junior lien holders are more difficult to negotiate with than others is that their business model is based upon buying up “worthless” junior liens from investors and enforcing (extorting) their rights when the borrower needs their approval. So, in essence, these investors buy up out of position notes for pennies on the dollar and sit on them until they are approached by the buyer for a short sale, for settlement negotiations or until the value of the house rises enough to put them into a positive situation which would allow them to potentially foreclose and recover the note amount. The reason that some of these lenders become very “stubborn” on what they want is partly because of SB 458. SB 458 is a California law that states if a junior lien holder agrees to the short sale, the lien holder loses the right to pursue a deficiency judgment. In other words, if they agree to the short sale what they agree to is all that they are going to get, period. SB 458 does not require junior lien holders to agree to a short sale, it just says that if they do, then they give up any additional rights that they might have. Once the short sale is approved the borrower’s debt is forgiven.
These “shrewder” lenders realize that by agreeing to SB 458 they will be giving up their rights and are prepared to take the risk the of the first lien holder foreclosing if they do not get a satisfactory recovery. If a Realtor cannot negotiate an acceptable contribution the junior lien holder will refuse to participate and the short sale will effectively be dead. Homeowners desiring to short sell their homes need to make sure that they retain the services of a Realtor that is capable of negotiating and handling complex short sales. Ideally, homeowners should try and locate a Realtor that is also an attorney as this will give the homeowner an added tool in the negotiations.
If you are a homeowner and you are seeking to short sale your house contact Michael Gaddis, Esq. of Michael Gaddis, J.D. Realty Group for a free consultation. Michael Gaddis is an attorney as well as real estate broker and is an expert in negotiating short sales. Michael Gaddis does not charge any differently than any other realtor. For short sales, Michael Gaddis does not charge any money from the homeowner as he is paid by the lender through the proceeds of the short sale. Michael Gaddis assists homeowners throughout the State of California.
Jenny Winford July 23rd, 2017
Posted In: Uncategorized
Short Sale Timeline: How Long Will A Short Sale Take?
The most frequent search term used to locate my short sale website is “Short Sale Timeline“. According to my website’s analytics people from all over the country are searching for information pertaining to the length of time a short sale takes to complete. While I provide a general time breakdown of short sales in my article located at http://sdshortsaleattorney.com/short-sale-timeline-how-long-does-a-short-sale-take-to-complete/ I think it is necessary to provide some updated information regarding short sales. First, short sales do not happen overnight. They take time. Much more time than a standard equity sale. Short sales require an additional, time consuming, step I will call “Lender Approval”. Lender Approval is when the short sale is evaluated by the homeowner’s lender to ensure that the offer is acceptable to the lender’s investor. There are several stages within the Lender Approval process that are necessary before the lender will issue an approval.
One of the most important parts of the Lender Approval process is “Property Valuation”. Property Valuation is when the lender hires a 3rd party real estate broker or appraiser to provide them with an independent opinion of value. The lender could use an automated valuation module (“AVM”), order a Broker’s Price Opinion (“BPO”) or order an appraisal. BPOs are used the majority of the time. BPOs are completed by local real estate agents and are usually more accurate than AVMs and much more cost effective to obtain than appraisals. The goal of Property Evaluation is to ensure that the submitted short sale offer is at, or close to, Fair Market Value (“FMV”). The lender has an obligation to the investors of the note to obtain an offer as close to FMV as possible. Waiting for the lender to order a BPO and to receive the results back typically takes 1-3 weeks.
Document Collection is also part of the Lender Approval process. In order to approve the short sale, lenders typically require the homeowner to fill out short sale request forms and submit financial documents. The length of time the Documentation Collection process takes depends on how quickly the homeowner and the selected real estate agent take to return the required documentation. This period of time could take a few days or a few weeks.
The Negotiation process takes places after the lender has received the results of the Property Valuation as well as all of the necessary documentation needed to process the short sale. During Negotiation, the short sale negotiator will review the offer price to determine if it is within the an acceptable range of the FMV. If it is not, the lender will counter the offer price during this time. The lender will also review the HUD to determine what expenses are and are not acceptable. Lenders will typically only allow expenses which are absolutely necessary for the sale of the property and will rarely allow such things as a home warranty or Section 1 termite expenses to be paid out of the proceeds of the sale. Negotiation of the short sale is a back and forth process that can take anywhere from 1-3 weeks. Real estate agents that are experienced at negotiating short sales are better able to prepare an acceptable HUD that lenders are more willing to accept.
The Lender Approval process culminates with Investor Approval and Issuance of the Approval. Most of the time the lender is not the investor of the loan. The lender is merely servicing the loan for a 3rd party investor. The lender reviews the short sale package, obtains the Property Valuation, collects the necessary documents and then negotiates the terms. Once all of this is completed the short sale file is submitted to the investor for approval. Most of the time this is a formality. However, sometimes investors are more involved and will thoroughly review the file and reject the lender’s negotiated terms and counter with their own. Although this is rare it does occur. Once the investor agrees to the terms the lender will issue Short Sale Approval and the short sale will then move into Pending status. The time period for obtaining Lender Approval can take 1-3 weeks on average.
As I pointed out in my previous article referenced above the average short sale takes, from beginning to end, 4-6 months on average. There are factors that can affect that time frame. One factor is if the property has multiple lien holders. If the homeowner has a 2nd lien or even a 3rd the time frame could be extended because each of those lenders has to go through their own short sale process in order to issue an approval. Many 2nd and 3rd lien holders will not even begin reviewing the short sale file until an approval has been issued by the 1st lien holder. Sometimes real estate agents can run into problems when the 1st lien holder requires approval from the junior lien holders before reviewing for the short sale. These situations can be extremely difficult to overcome by the average short sale because it creates a textbook “Catch 22″ situation. Another factor that could delay the short sale process is if the homeowner has any judgment or HOA liens on the property that need to be negotiated. In order for a short sale to be completed title must be clear of all encumbrances. Dealing with judgment and HOA liens could take weeks, or months, to deal with.
I must also point out that if your loan is serviced by Nationstar the estimated timeline for short sale completion could be increased by as much as 1-3 months due to the fact that Nationstar requires nearly every one of their short sales to be run through the Auction.com process prior to acceptance. The Auction.com process is used by Nationstar on the pretense of verifying the FMV of the property. However, it is a laborious process that is difficult to navigate through. So if you have Nationstar, you should plan on an additional month or 2 for short sale approval.
I will stick with my original time frame of 4-6 months for a short sale to be completed from beginning to end. Is it possible that a short sale could take less time? Of course. However, based upon my extensive experience negotiating short sales I stand by my 4-6 month timeline. A piece of advice. If you want to short sell your home find an experienced real estate professional to help you, preferably a real estate agent that is also an attorney. I might be a little biased but I am fully aware of what obstacles arise during a short sale and what my abilities are to overcome these obstacles. I know that many of the short sales that I have completed were only completed because I had to put on my metaphorical “Attorney Hat” to resolve the outstanding issues.
Once a short sale has been approved and a formal short sale approval has been issued the sale is just like any other sale. Escrow opens and the typical time periods apply.
If you are seeking to short sell your house and you are located anywhere in Southern California please call my office at 760-692-5950 or email me at Michael@MichaelGaddis.com If you live in San Diego, Riverside, Orange, Los Angeles, Santa Barbara, Ventura or San Bernardino Counties I can help you. When short selling your house do yourself a favor and get the best.
A Recipe For disastor: Short Sales & HOAs
For most homeowners, the decision to short sell is made only after an extensive amount of intense internal turmoil. Usually, homeowners decide to short sell only after realizing that fighting for a loan modification is futile or that, under their circumstances, that any resulting loan modification will not be in their best self-interests. Short sales are difficult emotionally for homeowners. Most have put enormous amount of time, money and sweat into their home. Once the decision to short sell is made most homeowners are quick to “circle the wagons” and start preserving as much money as possible. Many quit attending to maintenance issues, quit paying property taxes, quit paying for insurance and some even quit paying their homeowner’s association (“HOA”) dues. Homeowner’s rationalize all of this because they are not getting any money out of the sale of their home so the best way to recapture lost investment is to stop paying for ancillary costs related to the home. Of all of the things that a homeowner could stop paying perhaps one of the more challenging ones is HOA dues. Since 2009 HOAs have taken a beating from homeowners who have decided to stop paying. Many HOAs were forced into insolvency and many others were on the verge of going under. Homeowners that continued to pay their homeowners saw the effects of their HOA’s financial stress through deferred maintenance of common areas, raised HOA dues, closure of non-essential HOA maintained areas (pools, spas, clubhouses, etc.), etc. Homeowners who were at odds with HOA for failure to pay their monthly fees typically received fines and penalties for other issues related to deferred maintenance of the property as well. Homeowners would have a “add it to my bill” mentality. HOA bills that would have been $15k for past due HOA dues became $27k due to fines for things such as failure to maintain landscape, failure to repair a fence, failure to move a satellite dish, parking an RV or trailer in the driveway, etc. All of these fines added up to a monstrous past due HOA bill. For years HOAs sat back while accounts receivables increased.
HOAs attempt to exact revenge when homeowners attempt to short sell their home. First, HOAs can provide a financial obstacle to a successful short sale. Typically, the HOA will have filed a lien against the property thus ensuring that their spot in line. They must be dealt with. Sometimes 1st and 2nd lien holders will agree to pay off the HOA from the short sale proceeds. However, fewer and fewer lenders are agreeing to pay the HOA. The lenders are forcing either the buyers or the homeowners to rectify the HOA issue. Second, HOAs are no longer just sitting around waiting for the house to foreclose or for the homeowner to start short sell. Instead, HOAs are pursuing foreclosing on their interests. HOAs theorize that if they foreclose on the house and become the legal owners of record, they could evict the non-paying homeowner and then rent the house out for as much as possible to begin recovering their past due HOA payments. The HOAs understand that the senior lienholders could still foreclose thus extinguishing their legal rights but the HOAs are banking on being able to rent out the property for as long as possible. Third, if the homeowner is foreclosed on by the first lien holder the HOA will continue to pursue the homeowner for any past due HOA payments.
HOAs can be difficult to deal with when attempting to short sell a property. The best advice is to continue to pay the HOA throughout the short sale process. Paying the HOA will cause less problems and stress in the end. The small amount of money that can be saved by not paying the HOA is not worth the headaches that the HOAs can cause.
Jenny Winford July 23rd, 2017
Posted In: Uncategorized
Michael Gaddis of Dream House Realty, Inc. recently closed a short sale Carlsbad, CA. This short sale was, by far, the most difficult and complex short sale ever negotiated by Michael Gaddis. The first lien holder was Bank of America and the 2nd lien holder was PNC. The short sale began on September 02, 2010. From the beginning the short sale was plagued with issues. At first the main issue surrounded a dispute between the owner of the property and the person occupying the property. It took nearly 6 months to get this problem addressed. From there, a buyer was procured and full approvals were obtained from both the 1st and 2nd lien holders for a purchase price of $750,000. One week before escrow was set to close Lawyers Title ran an updated preliminary title report and discovered that 2 creditor judgment liens and an HOA lien had been placed on the property. Michael Gaddis approached the lien holders in order to try and work a deal out with them that would allow the sale to move forward. Both lien holders refused. At this point Michael Gaddis advised the Seller to file for bankruptcy which would effectively wipe out the Seller’s personal obligation on the debts. However, although the Seller’s personal liability on the debts was extinguished the liens were not stripped. After the bankruptcy the Seller expressed her desire to continue with the short sale. Meanwhile the Buyer advised Michael Gaddis that while he was still interested in the property he was no longer willing to pay $750,000. The Buyer thought the property was worth $700,000 and not a penny more. Even though Michael Gaddis thought that $700,000 for this property was a bit aggressive, he agreed to try and negotiate the terms that the Buyer dictated. Much to Michael Gaddis’ surprise, both the first and second lien holders quickly approved the sale for $700,000. Michael Gaddis was then left with the daunting task of dealing the judgment lien holders.
The first thing that Michael Gaddis had to decide was between reopening the bankruptcy and stripping the liens off or re-approaching the lien holders and negotiating the release of the liens. Michael Gaddis chose to re-approach the lien holders and found that 1 of the 2 lien holders was much more receptive to settling than they were prior to the bankruptcy. He quickly arranged a settlement with this lien holder. Likewise, the HOA was quick to arrange a settlement. That left just one judgment lien. Ironically, the creditor in question was FIA Credit Services, a wholely owned subsidiary of Bank of America. It was this creditor that caused the most problems for Michael Gaddis. At first, Michael Gaddis approached FIA Credit Services directly to which he found stiff, and unreasonable, resistance. At this point Michael Gaddis decided to utilize his numerous contacts within Bank of America to help him try and get this matter resolved. Michael Gaddis quickly found several members of Bank of America’s senior management that were willing to try and assist Michael Gaddis. Amusingly (in a nonsensical way), even Bank of America’s senior management had difficulty dealing with FIA Credit Services. Months and months passed by but eventually, Bank of America’s management was able to coordinate a settlement which would allow the short sale to close.
The challenges involved in this short sale were numerous and frustrating. Without a doubt, Michael Gaddis’ background as an attorney assisted him greatly in getting this short sale done. During the over two years it took to close this transaction, Michael Gaddis faced over 7 Trustee Sale Dates, 2 judgment liens, a bankruptcy, a motion to lift the automatic stay, expiring loan docs, a very upset HOA as well as conflicts between the Buyer and Seller.
In the end, everyone is happy, even FIA Credit Services. The Buyer purchased a home for $700,000 that, as of the day of closing, is valued on Realtor.com as $810,000 and on Zillow as $900,000. The moral of this story is that if you are going to short sell your house find a Realtor with the experience and knowledge necessary to handle any situation that might arise. You need to find someone like Michael Gaddis, or better yet, just pick up the phone and call Michael Gaddis. You will be doing yourself a favor. There are NO additional fees charged by Michael Gaddis. You can utilize the services of Michael Gaddis just as you would any other Realtor.
Jenny Winford July 23rd, 2017
Posted In: Uncategorized
Selecting the right real estate agent to help you short sell your house can be very challenging. Once you let your friends and family know that you have decided to short sell your home real estate agents will descend upon you like locusts, all assuring you that they are “Short Sale Experts” or that they use an “Experienced Short Sale Negotiator” or that they are a “Certified Short Sale Specialist”. Friends and friends of friends will appear at school or church or soccer games or parties all offering to help you in this great time of need. The reality is that not all short sale agents are created the same. Some agents claim to have years and years of industry experience and still others claim to be outright “Gurus” at selling distressed properties. Beware and take your time. Friends are friends but business is business. A good philosophy is to keep friendship and business separate.
The following are some questions and tips for correctly choosing the right short sale real estate agent for your situation:
1. Does the real estate agent process their own short sales or do they use an “expert”? Real estate agents that process their own short sale transactions tend to have a greater understanding of how short sales work than ones that rely on 3rd party ”professional negotiators”. Additionally, real estate agents that use 3rd party negotiators tend to try and pass the cost of the negotiator onto the homeowner. As a homeowner the cost of the negotiator should NEVER come from you. If a real estate agent wants to use a professional negotiator that real estate agent should pay for the negotiator out of their own commissions. Better yet, find a real estate agent that has experience processing their own short sales.
2. Do you have more than 1 lien on your property? Short sales that involve multiple liens on the property are exponentially more difficult to negotiate than short sales with just 1 lien. While anti-deficiency laws in California have protected homeowners from lenders who would otherwise agree to a short sale but still attempt to recover the deficiency they have now made second lien holders more difficult to negotiate with. There is no law that requires either a 1st or 2nd lien holder to agree to a short sale. Since 2nd lien holders can no longer pursue deficiencies they have become more obstinate. An average real estate agent can become overwhelmed or discouraged by the amount of tenacity it can take to bring a 2nd lien holder into line. Typically the first lien holder will agree to pay the 2nd lien holder a small (very small) percentage as a payoff. The 2nd lien holder usually wants more than the first lien holder is willing to give them in order to approve the short sale (thus giving up any deficiency rights that they might have if the property were to go to foreclosure). Getting the 1st and 2nd lien holders to agree can be extremely difficult.
3. Do you have any judgment liens or HOA liens on the property? If your property has any type of judgment liens and/or HOA liens then the short sale cannot be finalized until these liens are taken care of. This is a VERY difficult endeavor and something that 95% of real estate agents are not equipped to deal with.
4. Is the property a rental or is it owner occupied? Short selling a rental property has many nuances that can make it difficult for an average real estate agent. First, the real estate agent should strongly recommend that you perform your due diligence as to the tax ramifications of short selling a rental property. The tax ramifications could be via debt forgiveness or capital gains. If your real estate agent glosses over this issue then you should be very cautious about using that particular agent. A true real estate agent will have your best interests ahead of his own. The truth is that you should seek counsel from a CPA or tax attorney prior to entering into a short sale listing agreement, especially when the subject property is a rental. Second, renters can present another set of challenges that a normal real estate agent is not prepared or capable of dealing with.
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5. Are the loans on your home Purchase Money Loans or have you refinanced? Purchase Money Loans refers to homeowners that still have the same note (loan) that they purchased the property with. In other words, if you have never refinanced your house you probably have a purchase money loan. Purchase money loans are important because they carry special protections that are lost if you refinance. The applicability of laws like The Mortgage Debt Forgiveness Act of 2007 are somewhat dependent on the status of your loan as a purchase money loan or refinanced loan.
6. What is the reason for your hardship (like real estate agents, not all hardships are created the same)? Short sales are not guaranteed nor is the lender obligated to approve every single short sale. Like a loan modification one of the important considerations is the nature of the hardship that is forcing you to short sell your house. An experienced real estate agent should have an idea as to whether or not your hardship has a good chance at meeting the investor guidelines for an acceptable hardship.
7. Have you received a Notice of Default or Trustee Sale? If you have already received a Notice of Default (“NOD”) or Notice of Trustee Sale (“NOT”) the foreclosure clock is ticking and you need to find a real estate agent that is 1) familiar with the foreclosure process 2) capable of negotiating your short sale in a shorter amount of time and 3) has the know how to be able to push the sale dates off if necessary. Some lenders are VERY difficult and do not like to push sale dates off just to accommodate a short sale. Likewise, some investors, such as Freddie Mac and Fannie Mae, do not like to push sale dates off at all. You must be cautious and select a real estate agent that possesses the know how and ingenuity to perform under pressure.
8. How many short sales has the real estate agent that you are considering successfully completed? How many of those had multiple lien holders? Every real estate agent that approaches you will claim to be experienced in short sales. They have to say this because they would otherwise have no business in this economy. Remember, real estate agents are sales people. Not only will they attempt to sell your house they will also attempt to sell you on their qualifications. While you might want to help out your neighbor or friend from church that is a real estate agent the bottom line is that you are short selling your house because it is the best financial alternative for your family. Do not be persuaded by personal feelings. Short selling your house is a business decision and friendship is friendship and business is business. Experience is vital in selecting a real estate agent.
9. What type of training and/or educational background does the agent you are considering possess? Let’s face it, not all real estate agents are created equally. Check out your agent’s educational background. Do they have a college degree? Do they have a graduate degree? What tools does the agent bring to the table that will provide you with the best all around service. In addition, check out your agent’s credentials. What additional training courses or certifications do they possess?
Selecting the right real estate agent is a very important decision. Choosing the wrong agent can cause a homeowner to suffer consequences or stress that would have been avoided by performing due diligence during the real estate agent selection process.
Jenny Winford July 23rd, 2017
Posted In: Uncategorized
Michael Gaddis recently obtained short sale approval for a 2nd lien with Green Tree for a homeowner located in San Marcos, CA. The approval settled the $115,628.55 lien for $6,000. The lien was a purchase money 2nd lien. The first lien holder allocated $6,000 as a payoff for the 2nd lien holder. Green Tree originally wanted nearly $7,000 to settle the lien. The first lien holder held firm at $6,000. Michael Gaddis went back and forth with Green Tree until Green Tree acquiesced and agreed to the $6,000 settlement.
Jenny Winford July 23rd, 2017
Posted In: Uncategorized
Short Sale and Second Mortgage
Yesterday a real estate agent called me for advice on a short sale and second mortgage that she was in the middle of negotiating in Carlsbad, CA. The first lien of $675,000 was held by Chase and the second lien of $10,000 was held by CitiMortgage (“Citi”). The agent told me that she had obtained first lien approval via a HAFA short sale from Chase and that Chase had allocated $750 towards Citi’s junior lien. The agent said that Citi had rejected the $750 offer from Chase and, instead, wanted $8500. She told me that she was in a bind and did not know what to do, that she was in danger of losing the short sale because of the 2nd lien holder. The agent wanted to know what she should do. While I was talking to her 2 things came to my mind. First, why was this agent calling me and not talking to her broker. Of course I already knew the answer. The reason is that her either her broker was not an overly helpful broker or her broker did not know how to resolve the situation. Either way, this poor agent was relegated to searching the Internet in an effort to resolve this issue and came across my website and blogs. She called me because she could tell that I might have the knowledge and skill-set that she needed to try and save the short sale. It is sad because agents like this should be working with a broker like myself and not left on their own without any support or guidance. I work diligently with all of my agents to assist them in their efforts and do not leave them scouring the Internet for answers. The truth is that the situation that the agent relayed to me is somewhat common and their is a way to resolve it. The problem is that most agents do not possess the backing to get a junior lien holder to move. As an attorney and Realtor, I carry a bigger stick in my negotiations and know how to get the lender to listen. As a courtesy I gave the real estate agent some tips on what she should try and do. However, if you are a real estate agent that has struggled with short sales, you should really call my office and speak to me about coming to work with me.
The second thing that came to my mind was that these homeowners had retained an agent to short sale their house that was not overly qualified or did not possess the resources needed to complete the short sale. That is why it is really important for homeowners to contact Realtors like myself that have the ability to do things other Realtors and agents cannot do. Every real estate agent will tell you that they can do a short sale and that they have experience. They have to tell you that because if they told you the truth you would not hire them. The fact that I am an attorney is tangential and has nothing to do with my services to a homeowner retaining me to help them sell their home. In other words, you can retain my services exactly the same as you would any other real estate agent. The only difference is that my knowledge and experience and capabilities far exceeds the typical real estate agent. All things being equal, who would you rather have on your side?
Homeowners need to realize that not all real estate professionals are the same. A homeowner’s friend or acquaintance might have a real estate license but that does not mean that they are qualified to properly handle a short sale. For more information on how to select a real estate professional for a short sale please click the following link: http://sdshortsaleattorney.com/how-do-i-find-a-realtor-for-a-short-sale/.
Jenny Winford July 23rd, 2017
Posted In: Uncategorized
PHH Short Sale
Michael Gaddis recently closed a PHH short sale in Moreno Valley, CA. The PHH short sale was for a non-owner occupied rental home. The property had one loan serviced by PHH. However, while the PHH serviced the loan Fannie Mae was the investor. Fannie Mae is notorious for being difficult to deal with whether for loan modifications or short sales. PHH used a 3rd party, Cartus Asset Recovery (“CAR”), to faciliate the short sale process. The short sale process for this property was not without problems. As is the case with short sales on nearly all rental properties the renter caused some issues. The first issue was the fact that the renter wanted very limited showing hours. This restriction on viewing caused delays in procuring and acceptable offer. The second issue was the fact that the renter, who had lived in the house for years, trashed the house. The condition of the house was extremely poor. Due to the condition of the house house the only real buyers that could purchase the property were investors. Recognizing opportunity investors flocked to the house and submitted low ball offers justifying their low ball offers on the condition of the property and over estimating what it would take to get the property into marketable shape. Finally, an offer was accepted and submitted at $114,000. Fannie Mae rejected the offer and countered at $119,000. The buyer accepted but days away from closing backed out of the deal leaving Michael Gaddis scrambling to find another buyer and facing a Trustee sale 14 days out. Michael Gaddis found another buyer who was willing to pay the $119,000 which the seller accepted. The new offer was submitted to CAR and Michael Gaddis was told that the sale was going to placed on hold. Miscommunication between CAR, Fannie Mae and the Trustee caused the property to erroneously go to sale. However, CAR stepped up, recognized the mistake and convinced Fannie Mae to rescind the sale. Shortly after the sale was rescinded the 2nd buyer walked leaving Michael Gaddis scrambling to find another buyer. By then, the market had swung upward and CAR notified Michael Gaddis that the next buyer must be willing to pay a minimum of $130,000 to get approved. Luckily Michael Gaddis was again able to procure a cash buyer who was willing to close rapidly. This time, the buyer stuck and the property sold on November 27, 2012 for $130,000.
This PHH short sale is a testament to persistence. Michael Gaddis never gave up and overcame every obstacle, even a foreclosure sale, that was thrown at him.
A key element to the short sale timeline, and one that can affect the time periods mentioned in this article, is the proper selection of a real estate professional. Homeowners need to realize that not all real estate professionals are the same. A homeowner’s friend or acquaintance might have a real estate license but that does not mean that they are qualified to properly handle a short sale. For more information on how to select a real estate professional for a short sale please click the following link: http://sdshortsaleattorney.com/how-do-i-find-a-realtor-for-a-short-sale/.
Jenny Winford July 23rd, 2017
Posted In: Uncategorized