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.
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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/
Distressed homeowners throughout California facing the realization that keeping their home is not a reality often contemplate short sale pros and cons. After making the discovering that they will be unable to refinance and discovering that either they cannot qualify for a loan modification or that the payment that they could qualify for on a loan modification is not low enough to allow them to keep the house homeowner often consider the option of short sale. A frequent question homeowners ask is exactly what is a short sale. Very simply, a short sale is selling your house with the Lender’s permission for less than what is owed on the note. Notwithstanding the plethora of real estate agents that swarm upon distressed homeowners attempting to convince them to short sale their homes, homeowners want to know the short sale pros and cons and how a short sale will benefit them. The following is a discussion of short sale and cons:
PROS
Credit:Short sales are reported on a credit report as settled for less than agreed upon amount. From a credit perspective a homeowner’s credit will rebound much faster by resolving credit issues directly with the lender. Creditors consider a short sale as the responsible thing to do and frown more heavily upon a reported foreclosure where, objectively, it appears that the homeowner did nothing to attempt to resolve the situation. Good credit heals fast so if a homeowner had really good credit before a short sale then their credit will heal much faster. A word of advice to homeowners is to make sure that if there is an HOA involved to pay the HOA fees during the short sale.
Ability to Purchase a New House: Homeowners that short sell their homes are able to purchase a new home much sooner than homeowners that allow their property to go to foreclosure. Currently, a homeowner that short sells their home will be eligible to purchase a new in 2-3 years after the completion of a short sale through either a FHA or VA loan. This ability for a homeowner to get back in the “housing game” so soon after a short sale should be a very big motivation to short sell.
Resolve Associated Liens and Issues: Short selling a house allows a homeowner the ability to resolve all issues related to the house including, but not limited to, junior liens (2nd & 3rd liens), mechanic’s liens, HOA issues, property tax issues, judgment liens, etc. If a property is foreclosed on any recourse junior liens become unsecured creditors and typically will pursue a homeowner forcing the homeowner to either settle or file for bankruptcy. Some junior liens will file lawsuits and vigorously pursue the homeowners. The irony is that if the homeowner would have decided to short sell their home the junior lien holder could have been resolved with little or no money out of their pocket. This reason alone is a huge incentive for homeowners possessing multiple liens to short sell.
Control Foreclosure Timeline: Homeowners that decide to short sell their home are better able to control the foreclosure timeline and experience less stress than homeowners that merely allow the foreclosure process to take place. In essence, homeowners can take control of the chaos created by the short sale process. The ability to take control of the short sale process is a huge advantage of the short sale processes.
Stay in House Longer: Short selling the house may allow the homeowner to stay in their house longer than through the normal foreclosure process. Lenders are more amenable to postponing Trustee Sale dates if the house is in the short sale process.
CONS
Tax Consequences: Short sales might carry tax consequences. Although there are many ways to avoid the tax consequences including through the Mortgage Debt Relief Act (which is tentatively set to expire on December 31, 2013) and the insolvency provision of the tax code, homeowners should still consult with a tax professional (either a CPA or Tax Attorney) prior to completing a short sale. Beware: although a homeowner will sign many disclosures throughout the short sale process advising them to seek tax advice sometimes Realtors will either downplay the tax consequences or not mention them at all.
Rental Properties: Homeowners desiring to short sell a rental property should take extra care before deciding to short sell their house. Rental properties are not only subject to debt forgiveness tax but also capital gains tax. Homeowners should really analyze their potential exposure before deciding to short sell their rental property. In most cases, short selling is still the prudent action to take, however, homeowners should diligently investigate all potential ramifications before signing a listing agreement to short sell a rental property.
In weighing the short short sale pros and cons in most cases the scales definitely favor short sale over foreclosure. Once a homeowner has performed a thorough investigation and determined that a short sale is what is best the homeowner needs to decide what Realtor to choose to assist with the short sale. To read more about how to choose the right Realtor for a short sale please read the following link: http://wp.me/p25O37-aV.
If you are looking to short sell your house please contact Michael Gaddis, J.D. of Michael Gaddis, J.D. Realty Group. Michael Gaddis is a real estate broker and licensed California attorney and has completed over 100 short sale transactions. Michael Gaddis, J.D. assists homeowners in San Diego, Orange and Riverside Counties with their short sale and home selling needs. 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/
Carlsbad Realtor/Encinitas Realtor: Short Sale Problems
Yesterday I received a phone call from a lady who told me that she was days away from closing a short sale on her house but was now experiencing some short sale problems. The reason that she was calling me was because she did not feel that her Realtor was representing her best interests. First, she said, the Realtor did not even try to get her qualified for relocation assistance or tell her that relocation assistance might be an option. She only found out about the possibility of relocation assistance about half-way through the process when one of her friends who was also short selling their house asked her if she was receiving any money from the lender to help her move. When she confronted her Realtor she was told that she did not qualify for HAFA because her loan was not owned by Fannie Mae or Freddie Mac. The woman said that she did not believe her Realtor so she called her lender who told her that her investor did participate in HAFA but that it was too late. The lender told her that her Realtor did not follow the proper procedure for attempting to qualify her for HAFA. Second, her Realtor did not ask her at the time that the Realtor took the listing if she wanted to exclude any items from the sale of the house. The woman said that she wanted to keep her refrigerator and stove but she was being told that these items were transferred as part of the contract. The refrigerator and stove were purchased in 1999 and for reasons I will not get into, she had sentimental attachment to them. She told her Realtor that she never authorized him to sell her refrigerator and stove. He apologized and said that he made a mistake. She told her Realtor to fix the problem. He told her that he could not do that, that she was contractually bound to transfer the items. She told him that since it was his fault she should be able to keep her refrigerator and stove and that he should buy the new owner a new refrigerator and stove from his commission. The lady told me that the Realtor stood to make over $10,000 from the sale of her house and it seemed only reasonable that he fix his mistake. She did not want any money from him, she just wanted to keep her refrigerator and stove. She told me that she realized that they were old but she wanted to keep them just the same. The Realtor told her that his broker would not allow him to do that. Upon investigation she discovered that her Realtor was not working for the broker that listed her house. She was confused as to why her Realtor was representing her but the listing was in another broker’s name on the MLS and the DRE had no record of her Realtor working for that broker.
To make a long story short, if you are considering short selling your house perform your due diligence before you select a Realtor. By spending some time and thoroughly investigating the short sale process you will alleviate many of the short sale problems incurred by other homeowners. Additionally, make sure that you are very clear about any items that you desire to exclude from the short sale. Make sure that your agent lists these items in the Residential Listing Agreement. Do not get caught at the eleventh hour. Also, make it clear to your Realtor that you want to be considered for relocation assistance from your lender. Even if you do not get qualified for relocation assistance at least you know that your Realtor attempted to obtain it for you.
I receive numerous calls from homeowners just like the woman mentioned above who are experiencing short sale problems. I feel for these homeowners because I know that if they were using me to represent them that they would not be experiencing these short sale problems.
If you live in San Diego, Riverside or Orange Counties and are thinking of short selling your home contact Michael Gaddis, J.D of Michael Gaddis, J.D. Realty Group at 760-754-2121 for a free consultation and review of your situation. Michael Gaddis, J.D. is a licensed California attorney and Real Estate broker and using Michael Gaddis, J.D. to short sell your home costs a homeowner nothing out of his/her pocket. You get top-notch representation and the security knowing that if any issues or problems arise during your sale you have the best possible representation on your side. If you would like more information on how to properly select a real estate agent to represent you in a short sale transaction please refer to the following article: http://wp.me/p25O37-aV
To view copies of some of the short sale approval procured by Michael Gaddis please click the following link: http://wp.me/P25O37-3k.
Top 10 Short Sale Tips For Homeowners Desiring to Short Sell Their Homes.
1. Decision to Short Sell: Prior to seeking the advice of a Realtor make sure that a short sale is what you really want to do. You should exhaust all of your options by consulting someone that is knowledgeable and understanding of your specific situation. To view more information regarding options available to distressed homeowners you may visit the following website: www.californialoanmodificationattorney.com. If your house is severely underwater and the thought of keeping a property valued significantly below what you owe is not palatable and your lender will not consider a principal reduction then your decision should be relatively simple. If you have received a loan modification the general rule of thumb is: If your lender does not cut your principal balance and you are still significantly underwater post-modification, then the lender should provide you with a modified payment equal to or less than you could pay for rent. If your lender does not provide you with a payment equal to or less than rent and you are still significantly underwater, then you should consider exploring short sale options. Regardless, the point is that you need to be at peace with your decision to short sell.
2. Choose the Right Realtor: Not all Realtors are created the same. Some Realtors are more qualified to handle and process short sales than others. Of course they will all tell you that they are extremely qualified and that they have closed hundreds of short sales and that they have successfully closed 99% of their short sales, etc. Realtors have to say this because a large portion of the real estate market is short sales. If they did not convince you that they are qualified they would not have any work. The key is too research and find someone capable of handling any of the myriad of issues that might occur during a short sale. Traditional Real Estate transactions are complex legal transactions. Short sales possess the same complexity of a traditional sale but have the added difficulty of dealing with lenders and obtaining short sale approvals. Short sales can become even more complicated if there are issues with the HOA, judgment liens, uncooperative junior lien-holders, substantial deferred maintenance on the house, etc. To read an article about how to select the right short sale realtor please click the following link: http://sdshortsaleattorney.com/how-do-i-find-a-realtor-for-a-short-sale/
3. Research Tax Consequences: Short sales can carry potential tax consequences to the Seller. The short sale documentation and disclosures that you sign during the course of the short sale transaction advise of you of this and state that you should consult with a CPA and/or tax attorney prior to completing the short sale. Most Realtors will gloss over this issue. If your property is in the State of California and you have a purchase money loan (the same loans you purchased the property with) you should be insulated from debt forgiveness tax. However, as a homeowner it is up to you to do your due diligence and determine if completing a short sale will cause you to incur tax liability in the form of debt forgiveness or capital gains. Currently, if you meet the criteria set forth by the Mortgage Debt Relief Act of 2007 (currently set to expire on December 31, 2013) or if you meet the criteria for the insolvency clause you might be able to exclude tax liability incurred for debt forgiveness. You might want to begin your research by visiting the following IRS link: http://www.irs.gov/Individuals/The-Mortgage-Forgiveness-Debt-Relief-Act-and-Debt-Cancellation
4. Beware of Stalling: Many homeowners decide that if they are going to lose their home they might as well try and stall the process and stay in their house as long as they can without paying. While on the surface this might seem like a good idea you need to keep in mind 2 things. First, if you are potentially covered from tax liability under the Mortgage Debt Relief Act of 2007 it is important to remember that it is set to expire on December 31, 2013. While it is possible that it might get extended again for 2014 there is no guarantee. If you stall your short sale too much you might find yourself in a very stressful situation come December 2013. Last December homeowners with short sales set to close in December were literally on the edge of their seats waiting to hear if Congress was going to extend the Mortgage Debt Relief Act for 2013. When January 1st of 2013 came around and there was no word that it was going to be extended homeowners whose short sale closings were delayed into January faced the very real possibility that they might be faced with substantial tax liability that they would not have incurred if their short sale closed just a few days earlier. Do not put yourself into that position. Second, FHA rules currently allow for a homeowner to qualify for a new purchase loan three (3) years from the end of a short sale. Delaying the short sale process will only push back the earliest date that you might be eligible to buy a house again at market rate. Keep in mind that the short sale process in and of itself will take three (3) to six (6) months to complete from beginning to end. Delaying or stalling the process could lead to negative consequences. For a more comprehensive article on the short sale timeline please click the following link: http://sdshortsaleattorney.com/short-sale-timeline-how-long-does-a-short-sale-take-to-complete/
5. Relocation Assistance: Many lenders now offer relocation assistance programs to homeowners desiring to short sell their property. However, not all lenders offer relocation assistance. Relocation assistance is determined by the investor on the loan which might be different from the lender. In other words, if ten (10) people owning homes on the same block all have Bank of America as a lender and want to short sell their home, it is possible that some of the homeowners will receive relocation assistance and some will not due to the fact that not all ten (10) borrowers have the same investor. People frequently get confused by this and say things like, “Well my neighbor got relocation assistance so I should as well” or “My neighbor got $5000 in relocation assistance and that is what I want”. The problem is that your neighbor might have a different lender, a different investor, even if the same investor it might belong to a different investment pool with different guidelines, a different financial situation, a different risk of loss to the investor, etc. No two individual situations are 100% alike. Many homeowners become frustrated by all of this. All of this is another reason to select a Realtor that really knows about the ins and outs of short sales. The bottom line is that you need to make sure that your realtor knows how to try and obtain relocation assistance for you. If the Realtor you select does not know what he/she is doing you might lose eligibility. In order to receive relocation assistance at most banks they require that you follow their rules and procedures. If your Realtor violates those rules you could be out of luck.
6. Short Sale Negotiators: If your Realtor wants to charge you or the buyer a fee for negotiating the short sale or wants to use a 3rd party short sale negotiator you should pick another Realtor. First of all, a short sale should pretty much no cost you anything. If someone ask you to pay to provide this service look for another Realtor to assist you. Likewise, placing the burden of paying for a 3rd party negotiator on the buyer is not only unnecessary but it will also restrict the pool of buyers willing to put an offer on your house. There are too many listings that do not require this and the buyers will typically move on to those properties. If you would like a free consultation with a Realtor that will not charge you or the buyer to conduct a short sale please visit www.sdshortsaleattorney.com.
7. Stay Away From Low-Ball Offers: In order to short sell your house your lender will need to provide you with short sale approval. Lenders are looking to get fair market value (“FMV”) or close to it. If your Realtor obtains an offer that does not sound reasonable you need to be cautious about accepting it. You would be better served by continuing to market the property and gradually decreasing the listing price until an acceptable offer as close to FMV as possible is procured. Investors are notorious at trying to submit ridiculously low offers in order to try and get the bank to bite off. Sometimes they will ask your Realtor to represent them as well as you in hopes that the Realtor will be more willing to push their low offer. You might be told that you have nothing to lose by accepting the low ball offer. However, if the lender takes 2-3 months to review the offer and then counters the buyer and the buyer walks, you will have lost 2-3 months that you could have used to find a real buyer. Plus, you might be left facing a foreclosure sale date. It is best to try and find a reasonable offer. With that being said, if the property is in severe need of repair, and after a decent amount of marketing time, during which you gradually reduce the listing price, the only offer you receive is low, then you might be justified in accepting a low offer.
8. Beware of Investors Willing to Rent Back the Property: You might be approached by a Realtor or an Investor tempting you with the proposition of purchasing your property and renting it back to you. Be careful. Most lenders require that all participants in a short sale sign an arms-length transaction form under penalty of perjury stating that the seller will not receive any proceeds or that there are no hidden agreements for the seller to retain possession of the property. Additionally, these investors usually put the carrot of staying in your house in order to control the short sale with their low ball offers. If the bank does not agree to their offer they will typically drop out of the short sale leaving the homeowner with whatever time is left to try and complete the short sale before a foreclosure sale date occurs. Finally, if you do agree to allow an investor to try and purchase the property in hopes of retaining possession make sure that you know the terms of the post-sale rental agreement. You need to know the proposed rent, the term as well as the renewal terms. Remember, investors are not philanthropists, they are in the business of making money. If they are approaching you it is because they think that they can make money at your expense.
9. Homeowner’s Association Dues: If you live in a community that has a homeowner’s association (“HOA”) make sure that you keep current on your monthly HOA dues during the course of the short sale. HOAs are ruthless and they will pursue if you are foreclosed on. Most lenders will not allow past due HOA dues to be paid out of the proceeds of the short sale. That means that you are on the hook to pay them in order to finalize the short sale. If you do not agree to pay them and you are foreclosed on, the HOA could pursue you post-foreclosure. The wise thing to do is to continue making your HOA payments throughout the short sale process or you might jeopardize your short sale.
10. Check for Judgement Liens Other Title Issues: If you believe that there might be title issues such as judgement liens clouding your title it is best to let your Realtor know about this as soon as possible. Clouds on title can be a short sale killer if they are not addressed early enough. Issues such as judgement liens are another reason that you might want to retain a Realtor that has extensive experience in handling short sales. If you have a situation like this it is definitely advisable to retain a Realtor that is also an attorney.
This Top 10 Short Sale Tips For Homeowners website was created by Michael Gaddis, J.D., a Real Estate Broker and licensed California attorney. Michael Gaddis does not charge to help homeowners short sell their home and offers free consultations. To contact Michael Gaddis you may call 888-242-2272 or email Michael Gaddis at michael@dreamhouserealtyinc.net. To obtain more information regarding short sales please visit www.sdshortsaleattorney.com.
Encinitas Realtors are reporting that the Encinitas real estate market appears to be rebounding from the housing crisis. Home values are increasing and the amount of short sales and bank owned properties (REOs) on the market are decreasing. As of February 27, 2013, Sandicor, the San Diego County Multiple Listing Service (“MLS”), reported just one Active listing designated by the Encinitas Realtor as a short sale. That is a remarkable statistic considering that short sales and REOS were dominated the Active market just one year ago. The Active listing is located at 1414 Coop St. and has 4 bedrooms and 3 baths in 2,254 square feet of living space. The home is currently listed at $1,595,000 and has been on the market for 201 days. According to the MLS there are currently 13 Contingent listings in Encinitas. A Contingent listing is a listing that has an accepted offer but is waiting for approval of the offer from the lender(s). The 13 Contingent listings range in price from $1,498,200 for a 5,012 square foot home with 7 bedrooms and 5 baths to $250,000 for a 2 bedroom 1 bath condominium with 850 square feet. The average days on market for the Contingent listings is 162 days. The MLS report there are currently 4 Pending listings in Encinitas. The listings range in price from $1,149,000 for a 3 bedroom 5 bath 3,915 square foot home to $260,000 for a 2 bedroom 1 bath 1.032 square foot condominium. The average days on market for the Pending listings is 100 days. Finally, the MLS reports that since January 1st of this year 7 short sales have closed in Encinitas. The Closed short sale listings range in price from $2,295,000 for a 7 bedroom 6 bath 5,589 square foot home to $289,000 for a 2 bedroom 2 bath 880 square foot townhome. The average days on market for the Closed short sale listings was 83 days. The average sales price for the Closed short sale listings was $871,428.
What does this mean for Encinitas Realtors and homeowners? It means that short sales are currently in decline. Does this mean the end of the housing crisis in Encinitas? The answer to that question is not clear. Experts keep referring to a second wave of distressed property hitting the market but, to date, that has not occurred.
If you are looking to short sell your house and want to retain an Encinitas Realtor please contact Michael Gaddis, J.D. a short sale expert that you can trust. Michael Gaddis, J.D. is a real estate broker and a licensed California attorney so you know that no matter what you have the best Encinitas Realtor on your side. You can learn more about Michael Gaddis, J.D. by visiting his home page www.sdshortsaleattorney.com or by contacting him directly at 760-754-2121. To view previous short sale approvals procured by Michael Gaddis, J.D. please click the following link: http://sdshortsaleattorney.com/short-sales/approved-short-sale/
The Carlsbad Realtor February 2013 Short Sale Report provides a unique look at the current status of the Carlsbad real estate market in relation to short sales. In a report ran February 28, 2013 on Sandicor, San Diego’s Multiple Listing Service (“MLS”), there were 129 listings classified as Active, Contingent, Pending or Sold (since Janaury 1, 2013). According to the MLS there were 8 Active short sale listings on the market 4 detached, single-family residences and 4 condominium/townhomes. The Active listings ranged in price from $1,875,000 for a 6 bedroom 6 bathroom 5,610 square foot home to $289,000 for a 1 bedroom 2 bathroom 1,128 square foot condominium. The average listing price for the Active listings was $795,862 (median listing price of $591,950) and the average days on market was 106 days. The MLS reported that there were 62 Contingent listings on the market. Contingent listings are listings where the Seller has signed an offer from a buyer but where the lender has yet to approve the short sale. The Contingent listings ranged in price from $1,095,000 for a 5 bedroom 5 bathroom 3,708 square foot detached, single-family home to $119,000 for a 1 bedroom 1 bathroom 723 square foot condominium. The average Contingent sales price was $478,802 (median Contingent listing price was $459,500) and the average days on market was 135 days. There were 25 Pending listings on the market as of February 28, 2013. Pending listings are accepted offers with full lender short sale approval. Pending listings are in the normal escrow period associated with any real estate sales transaction. The 26 Pending listings ranged in price from $775,000 for a 5 bedroom 5 bathroom 3,663 square foot detached, single-family home to $125,000 for a 1 bedroom 2 bathroom 1,022 square foot condominium. The average Pending sales price was $449,657 (median Pending listing price was $405,000) and the average days on market was 100 days. Finally, there were 33 SOLD listings designated by Carlsbad Realtors as short sales since January 1, 2013. The SOLD listings ranged in price from $1,075,000 for a 5 bedroom 5 bathroom 4,608 square foot detached, single-family home to $160,000 for a 1 bedroom 2 bathroom 842 square foot condominium. The average sales price for the SOLD listings was $447,506 (median SOLD price of $424,900) and the average days on market was 132 days.
If you are looking to short sell your house and want to retain a Carlsbad Realtor please contact Michael Gaddis, J.D. a short sale expert that you can trust. Michael Gaddis, J.D. is a real estate broker and a licensed California attorney so you know that no matter what you have the best Carlsbad Realtor on your side. You can learn more about Michael Gaddis, J.D. by visiting his home page www.sdshortsaleattorney.com or by contacting him directly at 760-754-2121. To view previous short sale approvals procured by Michael Gaddis, J.D. please click the following link: http://sdshortsaleattorney.com/short-sales/approved-short-sale/
Michael Gaddis, J.D. recently closed a Homeward Residential short sale in the Arrowood community of Oceanside, CA. The property was located at 5329 Village Dr., Oceanside, CA and had a beautiful view of the Arrowood Golf Course. The homeowner had one loan on the property with Homeward Residential. This transaction was one of those rare short sales that ran entirely smooth without a single crisis issue. In fact, this short sale ran so smoothly that one might have thought it was an equity sale. A lot of credit has to go to the homeowner selling the property. He was extremely proactive and committed to the short sale process. Without a doubt this was the smoothest short sale transaction ever processed by Michael Gaddis and is evidence that if all parties involved in the transaction (buyer, seller, agents, lender, etc.) are fully committed that short sales do not have to be extremely difficult.
The homeowner left the property in exceptional shape. In fact, when the homeowner transferred the keys to the new owner on the day of closing the house looked brand new, like a model home. The homeowner in this transaction was truly amazing. His meticulous maintenance of the home surpassed even those selling their house for huge gains. He took pride in his house even when letting it go. People like this are rare and it was honor for Michael Gaddis to work with such a person.
The homeowner initially met Michael Gaddis while attending the Harbor Days street faire in Oceanside, CA in September of last year. He was impressed with the fact that Michael Gaddis was an attorney as well as a real estate broker. After spending over an hour speaking to him at the faire the homeowner made an appointment to visit Michael Gaddis at his Oceanside, CA office and retained him to assist with the short sale shortly thereafter.
It is always nice to close a short sale where everyone is at peace and happy with the result of the transaction. Michael Gaddis has completed several Homeward Residential short sales and everyone has been relatively smooth. If you have a Homeward Residential short sale and are located in San Diego, Riverside, Orange, Los Angeles or San Bernardino counties and would like a free consultation with Michael Gaddis, J.D. please contact him at 760-754-2121 or 888-242-2272. To view copies of the Homeward Residential short sale approval letter associated with this article or to see other short sale approvals procured by Michael Gaddis please cick the following link: http://sdshortsaleattorney.com/short-sales/approved-short-sale/
The number of ”Active” Carlsbad short sales is unbelieveably low. As of February 7, 2013 Sandicor, the San Diego County MLS, showed only ten(10) Active listings that were identified by listing agents as ”Active”. Active listings refer to listings that are currently being marketed without an accepted offer. Contrast the ten (10) active listing to the seventy (70) ”Contingent” listings and thirty-two (32) “Pending” listings. “Contingent” listings are listings where an offer has been accepted by the Seller but it is subject to lender approval. In other words, since the sale is a short sale, the bank has to agree to the short sale and issue an approval before the sale can continue. Short sale listings that are identified as ”Pending” have obtained the proper lender approvals and are officially in escrow in the final closing stages. The fact that there are only ten Active Carslbad short sale listings and one hundred and two (102) Contingent and Pending Carlsbad short sale listings indicates that most of the Carlsbad short sale listings that are marketed on Sandicor are getting accepted offers and moving relatively quickly into Contingent status. There does not seem to be enough new Carlsbad short sale listings to compensate leaving only ten (10) Active short sale listings. All of this indicates that 1) there is a shortage of short sale inventory currently on the market and 2) that there appears to be a surplus of buyers snatching up whatever short sales appear on the market. Another interesting fact about the Active listings is that seven (7) out of the ten (10) Active listings are either condominiums or townhomes. Of the three (3) remaining Active (single-family detached) listings two (2) are priced at $1,499,000 or higher. The remaining Active (single-family detached) home had extremely restrictive showing hours (the agent notes indicate that the only Showing to be on Jan 27th, 1pm-4:30pm) and unfavorable terms for the selling (buyer’s) agent. If you throw the three (3) Active listings for the single-family detached homes out of analysis based on being priced too high (thus appealing to a very small pool of potential buyers) or for being unreasonable in showing hours and selling agent incentives there are no Active single-family detached homes under $1,499,000 in Carlsbad that would be classified as a short sale.
This fact is amazing since the Carlsbad real estate market has been dominated over the past few years by short sale listings. Does this data indicate that the end is near for Carlsbad short sales?
In today’s distressed housing market many homeowners throughout California, are choosing to short sell their property. Since Chase is such a huge servicer of loans it is not surprising that “Chase Short Sale” is such a popular search term on Google. The processing of short sales differs from lender to lender as each lender has its own policies and procedures. Chase can be an extremely difficult lender for homeowners and real estate agents to work, especially if they are unfamiliar with how to navigate through their bureaucracy. A Chase short sale can become even more complex when multiple lien holders are involved, even if the multiple lien holders are all serviced by Chase. Homeowners and real estate agents need to realize that just because a homeowner’s mortgage statement comes from Chase doesn’t mean that Chase actually owns the loan. The more likely scenario is that Chase services the loan for another investor. Keeping this in mind allows you to better understand how conflicts can arise even if Chase is the servicer for multiple liens.
The Chase short sale process is pretty straightforward, however, homeowners should take care to retain a real estate agent that is experienced and knowledgeable with Chase. Remember, real estate agents will always represent that they are experienced so it is important for homeowners to check references and perform their due diligence before taking the word of any real estate agent. Too many times homeowners find out after the fact that the real estate agent that they retained is not qualified to properly represent them.
Chase does offer some relocation assistance programs, however, it is impossible for a real estate agent to know if a homeowner is eligible prior to engaging Chase in short sale discussions. Relocation assistance might come in the form of HAFA or an internal Chase relocation assistance program, but again, it is nearly impossible to represent or guarantee this prior to entering the short sale process.
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 Chase short sale. For more information on how to select a real estate professional for a Chase short sale please click the following link: http://sdshortsaleattorney.com/how-do-i-find-a-realtor-for-a-short-sale/.
Another frequently asked question pertains to the length of time that a Chase short sale will take. Chase short sales typically take 3-6 months from initiation of the Chase short sale to close of escrow. For a more detailed analysis regarding short sale timelines please click the following link: http://sdshortsaleattorney.com/timeline-for-short-sales-how-long-does-a-short-sale-take-to-complete/.
Overall, a Chase short sale should be a relatively fluid experience provided the correct real estate professional is chosen.
This article was written by Michael Gaddis, J.D. a licensed California attorney and real estate broker experienced in Chase short sales. Michael Gaddis assists homeowners throughout the State of California with their short sale needs but concentrates on San Diego, Orange, Los Angeles and Riverside counties. If you have questions for Michael Gaddis please feel free to contact him at 888-242-2272 or by email at michael@dreamhouserealtyinc.net.
To view sample Chase short sale approvals as well as other short sale approvals procured by Michael Gaddis please click the following link: http://sdshortsaleattorney.com/short-sales/approved-short-sale/
Another Short Sale Success story by Michael Gaddis, J.D.
Michael Gaddis, J.D. of Dream House Realty, Inc. recently closed a Bank of America short sale in Escondido, CA. The property was located at 123 Sunwest Glen. As is the case with all short sales, but especially with Bank of America short sales, this transaction was not without drama. As mentioned, the first lien holder was Bank of America. The second lien holder was owned by Chase by processed by a 3rd party called Five Lakes Agency. Getting everyone on the same page proved to be extremely challenging. Bank of America would issue an approval with a close of escrow (“COE”) date and then Five Lakes would match it. However, when errors were detected in the approvals (such as misspelling the buyer’s name) Michael Gaddis had to go and get revised approvals from both lien holders. Bank of America would issue an approval with a COE date and then, since Five Lakes took too long to issue their revised approval, Bank of America would have to reissue a new approval during which Five Lakes’ approval would expire and so on and so on. The problem was that Bank of America was issuing extended approvals for short time periods (3 to 7 days) which did not give Great Lakes very much time to procure their extension. This nonsensical cycle continued until Michael Gaddis escalated the issue within Bank of America seeking an extension to the approval longer than 3 days.
Additionally, the stress of this short sale was exacerbated by the failure of Congress to extend the Mortgage Debt Relief Act by the end of the calendar year which caused the homeowner to become extremely concerned at the possibility of a very large debt forgiveness tax.
Ultimately, the Mortgage Debt Relief Act was extended and the transaction closed on January 18, 2013. The moral of this story is that if you are thinking of short selling your house 1) find a Realtor that knows what they are doing and 2) do not wait until the last-minute to try to short sell your house. The homeowner in this transaction was proactive and did not wait until the last-minute but due to the aforementioned issues with the lenders we were still pushed against the deadline.
If you have been thinking about short selling your house do not wait or you might find yourself in a bad situation. If you are located in San Diego, Orange, Riverside, San Bernardino or Los Angeles Counties call Michael Gaddis, J.D. for a free consultation and assessment of your situation. You can reach Michael Gaddis at 888-242-2272 or by email at michael@dreamhouserealtyinc.net.
As of January 23, 2013 there were 18 “Active” listings in the Aviara community of Carlsbad, CA on the Sandicor MLS (“MLS”). Of the 18 Active listings, 15 were single family, detached homes. The 18 Active listings ranged in size from a low of 2,046 square feet listed for $554,000 and a high of 4,872 square feet listed for $1,740,000. The average list price for the 18 Active listings was $895,736. However, the average list price was slightly skewed due to two larger listings that were priced significantly higher than the remaining 16 listings: 7198 Aviara Dr. (4,700 square feet, 5 bedrooms, 5 baths, built-in 2001) was listed at $1,740,000 and 7232 El Fuerte St. (4,872 square feet, 5 bedrooms, 5 baths, built in 2004) was listed for $1,499,000. The next highest list price after these two was for 7237 Sanderling Ct. (3,112 square feet, 4 bedroom, 3 bath, built in 1998) which was accepting offers between $985,000-$1,100,000. The average days on market (“DOM”) for the Active listings was 66 days. According to the MLS there were no “Contingent” listings in Aviara as of January 23, 2013. There were 11 “Pending” sales (listings currently having an accepted offer and in escrow), one of which was a townhome, ranging in size from 2,046 square feet to 2,670 square feet. The average list price for these Pending listings was $702,696 and the average DOM was 35 days. According to the MLS 29 properties in Aviara were SOLD from December 1, 2012 through January 23, 2013. Of the 29 SOLD listings 25 were single family, detached properties. The SOLD listings ranged in size from 1,481 square feet sold for $431,000 (0 DOM) to a high of 5,712 square feet sold for $2,100,000 (258 DOM). The average sold price for the SOLD listings was $785,597 with an Average SOLD DOM of 49 days. The property that sold for $2,100,000 is located at 7136 Aviara Dr. (5,712 square feet, 5 bedrooms, 5 baths, built in 2008) and closed escrow on January 4, 2013.
The Aviara real estate market is definitely competitive right now due to the surplus of buyers concerned that the market might soon be trending upward and the overall lack of inventory. If you are looking to sell your home or are looking to purchase a home in Aviara feel free to call Michael Gaddis, J.D. of Dream House Realty, Inc. at 760-754-2121 or email at michael@dreamhouserealtyinc.net.
Homeowners frequently ask “what does short sale mean”? A short sale is a loss mitigation tool used by lenders to minimize damages for both the lender and the homeowner. Lenders agreeing to short sales avoid additional fees, costs and time delays that they might otherwise incur via traditional foreclosure proceedings. Borrowers agreeing to short sell their homes avoid the stigma of a foreclosure as well as potential deficiency judgements by recourse lien holders. In fact, the State of California passed legislation that prevented lien holders (including 2nd lien holders) from pursuing deficiencies (the short fall) if they agree to a short sale (SB 931, SB 458 – Calif. Code of Civil Procedure §580e). Thus short sales can be a win/win for both lenders and borrowers.
By definition, a short sale is the sale of real estate for less than what is owed on the home. In other words, the consideration (funds received) from the sale are not enough to pay the existing loan(s) off. The purchase price falls “short” of paying all lien holders off in full. Short sales are predominantly used during times where housing prices have fallen and it is impossible for the borrower to liquidate the home for what is owed. Lenders realize that due to the fallen market they will never be able to recover 100% of what is owed on the property whether through a short sale or foreclosure.
Thus, the answer to “what does short mean” is very simple, it means selling your house with the Lender’s permission for less than what is owed on the note.
How to Short Sale – A Step by Step Guide
Step 1: The Decision to Short Sell
The first step for a homeowners considering to short sell their property is to actually decide that a short sale is really what they want or need to do. Most homeowners decide to short sale because they believe that a short sale is their only alternative, that they have no other choice. Besides health and family, a person’s home can be the most important thing in their life. Deciding whether or not to short sale can be an extremely emotional time and can cause a lot of internal turmoil. The first thing a homeowner needs to do is get professional advice. With that being said, homeowners should be careful who they obtain the advice from. While a homeowner’s immediate inclination might be to seek out a real estate agent for advice, it would be prudent for a homeowner to to not put too much stock into what the real estate agent says. Real estate agents have a vested interest in your short sale. Their income and livelihood depends largely on homeowners who desire to sell their home. Nine times out of ten the real estate agents are going to suggest that homeowners sell their home. A better source for homeowners would be for them to seek the advice of an attorney who specializes in assisting distressed homeowners.
Homeowners need to make sure that there are no other viable options to save their house prior to deciding to sell. Otherwise there will always be “what ifs” and “we should haves”. Homeowners considering a short sale tend to fall within three general groups:
Homeowners that are so far underwater that they have come to terms that it does not make financial sense for them to short sell
Homeowners that are absolutely not qualified to receive a loan modification
Homeowners that obtained loan modifications with less than favorable terms. A general rule of thumb for homeowners that are severely underwater should be as follows: If a homeowner is severely underwater (they owe more on the note than their house is worth) and their lender is not willing to modify their loan into a payment that is equal to or less than they could rent a similar home for then the homeowner should strongly consider a short sale.
The decision to commit to a short sale is a difficult decision that should only be done after thoroughly exhausting all other choices.
Step 2: Check Tax Ramifications of Short Sale
Short sales might carry tax consequences for homeowners. It is important that a homeowner seeking to short sell a home seek the advice of a CPA or tax attorney prior to committing to a short sale. There are, at least, 2 different types of potential tax issues associated with the short sale of the home. The first is debt forgiveness tax and the second is capital gains tax. It is very important for Homeowners desiring to short sell an investment property to seek tax advice. Do not let anyone, including a Realtor, minimize the potential tax consequences of short selling a rental property. As of the date of this article The Mortgage Debt Relief Act of 2007 (“MDRA”) is set to expire at the end of this year (December 31, 2012). The MDRA allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure or short sale might qualify for relief. All indications are that the MDRA will be extended beyond this year, however, to date, it is still set to expire at the end of this year.
When a homeowner retains a Realtor to assist in the short sale of their home the homeowner is giving a plethora of documents to sign. In several of those documents are warnings to the homeowner to perform their own due diligence on the tax ramifications of a short sale. It would be prudent for a homeowner to heed these warnings prior to moving forward with the short sale.
Step 3: Select a Realtor
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.
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.
Step 4: Contact the Lender
Contacting the lender might sound like the logical next step in the short sale process but many Realtors do not do this and, instead, proceed with a short sale as they think it should be handled. However, due to the fact that there are several short sale incentive programs being offered by lenders these days (including HAFA and Bank of America’s enhanced relocation assistance programs) it is prudent to contact the lender at the process onset to determine the protocal for qualifying for these incentive programs. If a homeowner and his or her Realtor do not follow the correct procedure, the homeowner could lose out on anywhere from $3,000-$30,000 in potential relocation assistance. As discussed in Step 3 above, choosing an experienced and qualified Realtor to assist you throughout the short sale process is crucial.
Step 5: List the Property on the MLS and Secure Offer
The next step in the short sale process is to list the property and market it in order to obtain the highest offer. This part of the short sale is the exact same as a traditional sale. The Realtor markets the property in an effort to obtain the highest and best offer possible. There is no doubt that a homeowner will receive offers from investors attempting to get the homeowner to accept a low ball offer significantly below the fair market value of the property. These offers should be avoided unless absolutely necessary, as the lender is surely going to question whether the low ball offer is representative of the fair market value of the property. A diligent real estate agent will hold off advising his client to accept such an offer and, instead, continue marketing the property in an effort to obtain something closer to market value. However, that could take a little bit of time because finding qualified buyers in a depressed market can be difficult. As of the date of this article, the housing market in Southern California has started to pick up. There seems to be low inventory and higher levels of demand.
Step 6: Submit Offer and Loan Modification Package to Lender
After an offer is procured the next step in the short sale process is to submit the offer and the loan modification package to the lender for review (“Submission”). Some lenders have more fluid short sale departments and processes than others. For example, Chase and Wachovia are two of the more efficient lenders and, typically, they will review and process short sale requests much faster than other lenders. During Submission the lender will require the real estate agent to submit a short sale request, financial worksheet, hardship letter, supporting financial documentation, listing agreement, borrower’s authorization forms, the accepted offer, an estimated HUD1, a pre-approval letter for the buyer, proof of funds, etc. The Submission Stage is very document heavy and will require that the homeowner’s real estate agent be diligent in responding to requests from the lender. The lender may frequently ask for additional information or revisions to the HUD1.
Step 7: Negotiation
Once the lender has received all of the documentation needed to satisfy their internal requirements the negotiations begin. During the negotiations the lender will order internal pieces of information needed for the lender to be able to review the offer accepted by the seller. The lender will order a 3rd party valuation of the property either in the form of a Broker Price Opinion (BPO) or the lender will order an appraisal. The goal of the lender is to obtain a 3rd party opinion as to the fair market value of the property. Once the valuation is complete the lender can then review the offer to see if it is has a chance of being accepted by the investor on the loan. If the lender thinks that the offer is too low or if the lender is unwilling to pay for charges listed on the HUD1, the lender will issue a counter offer to the real estate agent. The real estate agent then contacts the buyer’s agent and the negotiations begin. The seller has very little to do with the final outcome as the real issue is obtaining an offer from the Buyer that the lender will accept. Once a price and HUD1 have been agreed upon the lender will send the file to the investor to obtain final approval. Once final approval is obtained the lender will issue an approval letter (see my website for examples of what a short sale acceptance letter looks like) and the short sale will advance to the next stage.
Step 8: Escrow
Once an approval letter has been obtained for all lien holders involved in the short sale the homeowner is now officially in Escrow. From this point forward the sale of the property is the same as it would be for a traditional sale. The Buyer will conduct inspections and order an appraisal. Once the Buyer has acquired funding Escrow will close and the short sale will be completed.
The content of this article might seem overwhelming, but we’re here to help. Michael Gaddis, Esq., Broker/Realtor® of Dream House Realty, Inc. offers complimentary consultations to homeowners throughout Southern California considering whether or not to short sale their homes. Michael Gaddis’ knowledge and experience as an attorney provides homeowners with a wealth of knowledge and expertise not possessed by the average real estate agent.
To schedule a free consultation with Michael Gaddis to determine a short sale is the right option for you, contact Michael at michael@dreamhouserealtyinc.net or by phone at 888-242-2272.
