What to Expect from a Short Sale and Timeline of a Short Sale

Radio host and short sale expert Michael Gaddis, J.D. of Michael Gaddis, J.D. Realty Group recently discussed short sales on his radio show which airs on KCBQ AM1170 The Answer.  On his September 30, 2015 episode of “The Michael Gaddis Show” Michael Gaddis, J.D. began by discussing how to properly select a real estate professional to represent you in a short sale.  Michael Gaddis, J.D. stated that not all real estate agents are created equally and that although every single one of them will tell you they are experts at short sales to be careful.  Short sales can be very difficult and challenging even for the most experienced agents.  Appreciating home values and challenges from HOA liens, junior liens and  judgment liens can create serious problems.  The average real estate agent is simply not equipped to handle the complexities that many short sales present.  Michael Gaddis, J.D. then discussed exactly what a homeowner can expect from a short sale including the timeline of a short sale.  Michael Gaddis, J.D. only allocated this one segment to short sales and was cut short by his producer with a lot to say.  Michael Gaddis, J.D. will continue to dedicate a portion of his show to short sales. 

If you would like to hear podcasts of “The Michael Gaddis Show” please feel free to visit KCBQ’s webpage at http://am1170theanswer.com/pages/the-michael-gaddis-show.  Michael Gaddis, J.D. assists buyers and sellers of real estate in San Diego, Orange and Riverside Counties.  In addition to being a real estate broker Michael Gaddis, J.D. is also a licensed CA attorney (www.LawOfficesofMichaelGaddis.com) and the CEO and broker of Frontier Loan Group, Inc (www.FrontierLoanGroup.com).  Michael Gaddis, J.D. is licensed by the California Bureau of Real Estate as a real estate broker License #01433800.  Michael Gaddis, J.D. Realty Group CALBRE# is 01465493.  If you or someone you know is thinking of short selling their house you can have them contact Michael Gaddis, J.D. at 760-692-5950 or 888-242-2272 or by email at Michael@MichaelGaddis.com.  You can also visit the Michael Gaddis, J.D. Realty Group Facebook page at www.Facebook.com/michaelgaddisrealtygroup

Difficult Short Sale Closed in Roseville, CA

Michael Gaddis, J.D. of Michael Gaddis, J.D. Realty Group recently closed a very difficult short sale in Roseville, CA.  The short sale was difficult for three primary reasons:  1) the first loan was serviced by Select Portfolio Servicing (“SPS”); 2) the borrower had a 2nd loan encumbering the property serviced by Greentree; and 3) the property was a condo and the HOA had issued a pre-litigation “Notice to Builder.”  The Combination of SPS and Greentree can be lethal to most real estate professionals.  SPS continuously challenged the value making every attempt to get more and more money.  Greentree is notorious for being a difficult 2nd lien holder and are known for always asking for more than what the 1st lien holder allocates for the 2nd lien release.  If you have Greentree as a 2nd lien holder and desire to short sell your property you really need to contact Michael Gaddis, J.D.  However, the worse problem was the pre-litigation status of the HOA.  Whenever the property is a condo and there is any type of litigation involving the HOA lenders get extremely hesitant to lend money.  At first Michael Gaddis, J.D. tried to find all cash buyers to purchase the property.  The problem is that all cash buyers are shrewd and do not want to pay anything near full market value.  In fact, they want the deal of the century.  They feel that their all cash status entitles them to a huge discount on the property.  Unfortunately, most lenders do not agree.  SPS kept pushing for a higher purchase price.  The problem was finding someone who was willing to pay what SPS wanted while at the same time finding a lender that did not have a problem with the HOA issue.  Buyers came and buyers went, all promising that their lender did not have a problem with the HOA.  Months past.  Michael Gaddis, J.D. had to find buyer after buyer until he finally found a buyer that promised that his lender did not have a problem with the HOA.  As a precaution, Michael Gaddis, J.D. contacted the lender and peppered the lender with questions to ensure that the lender fully understood the situation.  Once Michael Gaddis, J.D. was convinced that the lender would come through Michael Gaddis, J.D. resubmitted the short sale package to SPS.  SPS is a horrible servicer.  They delayed and delayed forcing Michael Gaddis, J.D. to use all of the resources at his disposal to move the file along.  Finally, after what seemed months, SPS issued an approval.  Michael Gaddis, J.D. then had to get Greentree on board for the amount that SPS had approved.  Normally, if a 1st lien holder allocates $10k Greentree will ask for $10,200 or something ridiculous like that.  However, Michael Gaddis, J.D. has been assisting homeowners throughout the State of California with short sales since 2009 so he was fortunate enough to have contacts within Greentree that were able to override their normal channels and issue an approval for the amount allocated by SPS.

It was an exhausting process that was extremely stressful for the seller.  The seller absolutely did not want a foreclosure on his record and Michael Gaddis, J.D. did not want to let him down.  Michael Gaddis, J.D. fought hard to ensure that the seller’s credit would be preserved.  Many real estate professionals would have given up.  However, Michael Gaddis, J.D. does not know the meaning of “Give up.”

Michael Gaddis, J.D. is a real estate broker based in Carlsbad, CA.  Michael Gaddis, J.D.’s experience as an attorney focusing on distressed homeowners greatly enhances his ability to get short sales done.  Although Michael Gaddis, J.D. is based out of Carlsbad, CA he helps homeowners through Southern and, on occasion, Northern California short sell their homes.  If you or someone you know is thinking of short selling their home you need to call 760-692-5950 or 888-242-2272 or email Michael Gaddis, J.D. at Michael@MichaelGaddis.com.  Michael Gaddis, J.D. is also the radio host of “The Michael Gaddis Show” on KCBQ AM1170 The Answer on Wednesdays at 8PM.  The show focuses on anything and everything related to real estate.  You can learn more about Michael Gaddis, J.D. by visiting www.MichaelGaddis.com or www.facebook.com/MichaelGaddisRealtyGroup


San Diego Short Sale Expert and Radio Host Michael Gaddis Discusses Short Sales

Short sale expert Michael Gaddis, J.D. of Michael Gaddis, J.D. Realty Group discussed the status of the short sale real estate market as of September 9, 2015.  Michael Gaddis, J.D. hosts “The Michael Gaddis Show” on KCBQ AM1170 The Answer discussing anything and everything related to real estate.  Michael Gaddis, J.D. is unique among real estate professionals in that in addition to being a top producing Realtor he is also a licensed CA attorney and the NMLS licensed mortgage broker of Frontier Loan Group, Inc.  During the show Michael Gaddis, J.D. discussed how nearly 10% of San Diego County homeowners are still underwater, meaning, that these homeowners owe more than their home is worth.  Michael Gaddis, J.D. discussed the inception of the housing crisis, the infancy of loan modifications and the advantages and difficulties of short sales in today’s real estate market.  Michael Gaddis, J.D. handles short sales for homeowners throughout Southern California and is more than capable of handling just about any situation which might arise.  Homeowners throughout Southern California have been using Michael Gaddis, J.D. to assist them with their short sales regardless of where they are located because they know that Michael Gaddis, J.D. is the best equipped to help them transition into a new phase of their life.  “Short Sales are all about transition,” said Michael Gaddis, J.D. ”My goal is to guide my clients through the process and help them transition into a new phase of their life.” 

Short sales are not easy and not every real estate professional is equipped to handle the ancillary issues that might arise during the short sale process.  Rising values are not helping as lenders and servicers are becoming more difficult to work with due to their decreased risk of loss.  Michael Gaddis, J.D. always tries to get homeowners qualified for some time of short sale incentive, if possible.  Michael Gaddis, J.D. understands the emotional aspects of short sales and the need for homeowners to have hope for the future.  Michael Gaddis, J.D. utilizes his mortgage background to advise his clients on what they need to do to putt themselves in a position to purchase a new home in the future. 

Listen to the segment from the Michael Gaddis, J.D. show and you will most certainly learn a lot about short sales.  If you or someone you know is considering a short sale they may contact Michael Gaddis, J.D. at Michael@MichaelGaddis.com or call 888-242-2272 or 760-696-1425.  You may also learn more about Michael Gaddis, J.D. at www.michaelgaddis.com or www.californialoanmodficationattorney.com.  Lastly, you can visit Michael Gaddis, J.D. Realty Group’s Facebook page at www.Facebook.com/michaelgaddisrealtygroup.  To listen to more episodes of ”The Michael Gaddis Show” you may visit  http://am1170theanswer.com/pages/the-michael-gaddis-show.

Notice of Default: When To Short Sell


Every month thousands of homeowners located in Orange County, Riverside County and San Diego County receive a Notice of Default from their lender.  A Notice of Default (“NOD”) signals the beginning of the foreclosure process and should be an indicator to the homeowner that they need to try and find a resolution as quickly as possible.  In California, lenders have to wait 90 days from the day the NOD is filed before they can issue a Notice of Trustee Sale (“NOT”).  The sale date indicated in the NOT has to be 21 days from the filing of the NOT.  In effect, once a NOD is filed the clock starts ticking.  While there are ways to delay or prolong the foreclosure deadlines, one thing is for sure, eventually, if the homeowner fails to reinstate the past due amount or refuses to obtain a loan modification or fails to successfully short sell the property their home will be foreclosed on.

The question for many homeowners is “How do I know when it is time to short sell?”  In other words, how long can they push the envelope and still have time to short sell.  Like loan modifications, a short sale is a loss mitigation tactic used by lenders to minimize the losses for the investor of the loans.  Lenders agree to short sales because, in most cases, a short sale will result in less losses to the investor than would a foreclosure.  However, the longer the delinquency and the closer to a trustee sale that a homeowner gets, the more difficult that transitioning into a short sale becomes.

Deciding whether or not to short sale depends on what would need to be done to keep the house.  First, homeowners should “realistically” determine whether or not obtaining a loan modification is possible.  While homeowners have every right to work directly with their lender, the best advice is to approach someone that is experienced in loan modifications such as www.californialoanmodificationattorney.com and ask for an independent evaluation of their chances at successfully obtaining a loan modification that will result in a payment that is affordable.  Homeowners should stay away from entities that promise results that are too good to be true or that are unable to provide a detailed explanation as to why or why not a loan modification has a chance of being granted.  Homeowners must also beware of the fact that many of these companies will make promises to assist on a loan modification hoping to lure them into a short sale.  Second, homeowners should explore whether or not filing a Chapter 13 Bankruptcy is a viable option.  My experience has indicated that most of the time a Chapter 13 provides only a temporary band-aide.  However, homeowners should at least take the time to exhaust this possibility.  Third, homeowners should determine whether, in the event they cannot save their home, they would like to purchase a home in the near future.  If a homeowner has a realistic chance of qualifying to purchase a home in the near future the homeowner should determine whether they would like to waiting period to buy a new home to start sooner or later.  Most homeowners who make this determination choose to sell quickly so that they can get back into the buying pool as quickly as possible. 

The simple answer to the question ”when to short sell” is as follows:  whenever the homeowner is resolved to the fact that keeping the home is either impossible or not in their best financial interests.  While staying in the house for as long as possible without making a payment might seem attractive, in the long run, it might not be the best course of action.

Both loan modifications and short sales are getting tougher and tougher to obtain.  Increasing property values have started to shift the leverage in negotiations from the borrowers to lenders.  Waiting could result in a significant amount of unnecessary stress and anxiety.  The best thing to do is to take control of chaos by being realistic about what options are available. 

If you are thinking of short selling your property and you are located in Orange, San Diego, San Bernardino or Riverside Counties contact Michael Gaddis, J.D. at 888-242-2272 or Micheal@MichaelGaddis.com .  For more information related to short sales please visit www.sdshortsaleattorney.com or www.michaelgaddis.com.

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. 



Short Sale Approval for 7053 Leeward St., Carlsbad, CA

Leeward Better

Michael Gaddis, J.D. Realty Group recently obtained a short sale approval for Michael Gaddis’ listing at 7053 Leeward St., Carlsbad, CA.  The process has not been easy or without its problems.  To date, 2 different buyers have backed out during the lengthy short sale negotiation process.  The current approval is the 3rd approval that Michael Gaddis and his staff have had to procure so far.  The reasons the previous buyers backed out had nothing to do with the property, the buyers just got fatigued by the amount of time that Bank of America, the servicer of the loan, was taking to issue an approval.  By the time that Bank of America issued the approvals the buyers had moved on. 

The irony is that the homeowner is participating in the cooperative short sale program at Bank of America which allows Bank of America to become involved in the marketing process of the short sale.  Since Bank of America was involved in setting the price one would imagine that approving the short sale would not take a long time.  However, the short sale process for this particular property has been laborious.  Bank of America has repeatedly closed out the short sale process without cause only to reopen it and start from the beginning.  Thankfully, Michael Gaddis, who is also a licensed California attorney, contacted several Senior Vice Presidents (“SVPs”) at Bank of America and advised them of the nonsense that had been transpiring during this particular short sale.  The SVPs intervened and the short sale was put back on track. 

The reality is that every short sale has its share of problems.  Some more than others.  In attempting to obtain an approval for 7053 Leeward St., Michael Gaddis had to stop six (6) Trustee Sales.  When asked about the difficulties faced with short sales Michael Gaddis smiled and said, “Short sales are definitely not for the faint of heart.” 

The current buyer has remained patient and steadfast during the approval process.  Another key to a successful short sale is selecting a buyer that will remain patient, is flexible and committed to the property.  Selecting the wrong buyer can be disastrous.  Investors tend to be the most fickle buyers and will frequently bail without much notice.  Buyers that are purchasing the property for their owner occupied home are usually more committed to the process. 

Michael Gaddis is hopeful that this transaction will close on or before July 25, 2014. 

Short Sale with Second Lien Closes for Oceanside Homeowner

Short Sale with Second Lien
Closes for Oceanside Homeowner of 55+ Community


Short Sale with Second Lien Video Transcript

**Video Auto-transcribed by Youtube, please excuse any inconsistencies.

Hi I’m Michael Gaddis. I recently closed a short sale with a second lien in Oceanside located at 3673 Mira Pacific Street this property is located at 55 and older community and has significant deferred maintenance the property had  was encumbered by to reach the first was with SLS and the second lien was with real time resolutions, or RTS as the  as is commonly the case when you have a person second lien holders  that they are withheld by different servicers there was a battle  the first lien holder SLS wanted to give the second lien holder  RTS twenty one hundred dollars are eight percent other outstanding balance  of course RTS wanted more money after haggling them down I eventually got into  agree to 4,000 you know you’re probably thinking well four thousand is not 2100  well I approached the other agent buyer’s agent might all about problem  I said it seems that we are at an impasse  you know a SLS only wants to get 2100  RTS once 4,000  well after discussions you agree to approach her buyer to see  what his idea less the buyer  told his agent that he was willing to bring in the nineteen hundred dollars  problem solved right actually not  the problem is that SLS was not going to allow for third-party contributions to the second lien holder  at all from NOLA period  in other words SLS was telling RTS  you’re getting a percent you’re not getting anything  that’s it so we had this battle over egos going on between us a lesson RTS  in fact we conference called RTS and as a less together  an RTS pitch their point and as a less was still saying  no now SLS at something interesting they said that it was based on their investor  guidelines that basically their investor  worse preventing them from allowing third-party contributions  well I asked to do their investor was they told me and they said it was  Bank of America well just so happens I know people obey America  so I went to Bank of America and I told you about the problem Bank of America said well that should be adaptive an issue  we can allow for a third party contribution let me research it  so after the research that they can to find out  they don’t own the loan anymore they sold %uh servicing rights  mean the ownership rights of two nations star well it just so happens I know  people in Nation star to  so I want a nation star and I told Nation star the same day  and they told me it shouldn’t be a problem but let me investigate  in the meantime I approached RTS  about it in fact I approached a very high level executive at RTS about it  and I told him about the problem  so apparently he had some contacts over at Nation star as well  so between the executive at RTS  and my cell we were able to get a very high level nation star  executive involved who authorized SLS  to allow for the third party contribution to go through so that we  can close the short sale  this is a classic case  how you know short sales  most believe holders can become very, very difficult situations for  your average real stage it the only way that I was able to navigate through this  was I had to take my  realtor cap of in but my lawyer had on  in trying to get someone over there who had some sort of a  power to look at this objectively and say  it doesn’t make sense for us to let this thing go through  I it was a very good offer on the house the house was an  a you know had a lot of deferred maintenance SLS didn’t want to take this  ass back  they were getting a very good offer on it was a good deal for everyone involved  and that age to the intervention  executives at Bank of America nation star an RTS  we were able to close this Short Sale with a second lien.


More Closed Short Sales


Mortgage Debt Relief Act Expires

Mortgage Debt Relief Act Expires

What This Means for Homeowners Wanting To Short Sell in 2014

Michael Gaddis, of Michael Gaddis, J.D. Realty Group and the Law Offices of Michael Gaddis, mortgage and loss mitigation law, talks about how the expiration of Mortgage Debt Relief Act affects homeowners hoping to short sell their house in 2014.

Video Transcript:

I’m Michael Gaddis your California short sale expert I wanted to take a few moments today to talk about the Mortgage Debt Relief Act of 2007. The Mortgage Debt Relief Act of 2007 will expire at the end of this calendar year. It appears that congress will allow it to expire as such it leaves some questions regarding what is going to happen to homeowners who are still underwater and who desire to short sell their house.  Will there will they not incur tax liability related that sale in California? We have an anti deficiency statute and the Code of Civil Procedure section 5b the anti deficiency statue basically says that lenders desiring to approve short sales in the state of California have to waive their right to a deficiency.

Sometimes short sales can be a little bit more difficult when you have second liens involved because second lien holders have to give up their right to pursue deficiency judgments. So, they become a little bit more stubborn about what they want to recover but I digress.Our Senator Barbara boxer was concerned about the potential expiration of the mortgage debt relief act so in a letter to the IRS dated August 28 she asked the IRS’s section 58 EE the Code of Civil Procedure would in any way protect California homeowners from any income tax liability resulting from debt forgiveness. in a letter dated september 19 and basically said this is really good news because the IRS is basically stating that even though the Mortgage Debt Relief Act of 2007 is going away that California homeowners are still protected from a tax liability resulting from short sales.

Shortly after the letter from the IRS to Senator Boxer the State of California’s Franchise Tax Board issued a letter dated December 4 in which they stated that they would take a similar stance related to you the and Mortgage Debt Relief Act and winter but section 58 EE in the same manner as the IRS now this is great news because is it is a confirmation from both the IRS and the state tax Franchise Tax Board that homeowners who were short sale their house will not incur tax liability as a result.

Now the California Association of Realtors read these letters issued a press release dated December 4 in which they are expressing their gratitude to both the IRS and Franchise Tax Board for clarifying this for California homeowners. Because without this clarification homeowners might go into foreclosure or file bankruptcies as a way to try to circumvent any sort a debt forgiveness tax. If you desire arm to see the actual letters the press release from the California Association of Realtors you should be able to find those either by Googling them are you can find him on my web site www.MichaelGaddis.com I have copies a the letter from the IRS to Senator Barbara Boxer and I have a copy of the car press release all stating what I said earlier.  

Just for the record I’d like to state that even though I am a real estate Broker, a short sale expert, and a licensed California Attorney, I am NOT a tax attorney and that if you desire to be 100 percent sure about the tax ramifications are the news short sales in California you should consult a CPA or tax attorney. With that being said the letters from the IRS and the franchise tax board are very clear. Still, I suggest that you read them yourself and if you have any questions or comments regarding them you can either contact me or our CPA 760.692.5950

Short Sale Closed at 3586 Seafarer Dr., Oceanside, CA 92054



Michael Gaddis, J.D. Realty Group successfully closed a short sale on October 30, 2013 at 3586 Seafarer Dr., Oceanside, CA 92054.  The property sold for $379,000.  This short sale had 2 liens, the first was with ASC (basically Wells Fargo) and the second lien was with Wells Fargo.  Like all short sales, this particular short sale had its share of issues.  First and foremost, the property had some deferred maintenance.  Deferred maintenance can be a problem because it restricts the pool of potential buyers that can purchase the property.  Buyers looking to purchase properties with VA and FHA loans can run into problems when attempting to purchase a property with deferred maintenance.  FHA and VA guidelines have rules pertaining to the condition of the property.  Properties with issues such as peeling paint, cracked windows, missing appliances, etc. can run into problems when the house is appraised by the buyer’s lender.  Issues that a VA or FHA appraiser identify as being outside FHA and VA lending guidelines are usually listed in the appraisal report as items that need to be corrected.  FHA and VA lenders require that these items be addressed prior to approval.  Once the listed items are repaired/addressed the appraiser will revisit the property and verify that the repairs have, in fact, been completed.  Since sellers in short sales are losing their homes these sellers are typically unwilling to put any money into the property.  Likewise, lenders approving short sales are unwilling to approve the necessary funds to correct any deferred maintenance. 

Since 3586 Seafarer had deferred maintenance FHA and VA buyers were not the best candidates to purchase this home leaving cash and conventional buyers as the most likely buyers.  Another issue with this short sale was the fact that the seller had a solar lease on the property.   The solar company had a lien on the property so the solar lease had to either be bought out or the lease needed to be assumed by the buyer.  The lease had 19 years left and many potential buyers did not want to assume a solar lease with such a long remaining term.  The solar lease issue was a little perplexing because the amount of the lease was less than the electrical bill that the homeowner was paying prior to the lease.  Plus with hikes in SDGE’s rates, the solar lease appeared to be a no brainer. 

The last major issue encountered during this short sale had to do with the fluctuation in the market.  The market conditions changed considerably during the course of this short sale.  Four (4) different offers were accepted during the short sale process.  The first three (3) buyers backed out each time, usually after short sale approval.  Fortunately, Michael Gaddis was proactive and collected several backup offers. 

Finally, on October 30th the property closed.  The buyer intends on renovating the home and listing it for sale again. 

Michael Gaddis is a real estate broker and licensed California attorney that is an expert in marketing and negotiating short sales throughout the State of California.  If you have a question about short sales or have been thinking about short selling your home please feel free to contact Michael Gaddis at 888-242-2272.


Negotiating Short Sales With Junior Lien Holders

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. 


Short Sale Problems: Junior Liens

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.

Join us at the San Marcos Swing Into Spring Festival

 San Marcos Sprng into Spring Festival

Come visit the Michael Gaddis, J.D. Realty Group booth to speak with us in person in a fun, local environment.

Sunday, April 14th, 2013 9 am – 5 pm
Located on Via Vera Cruz, San Marcos, CA
Featuring 200 Vendors, entertainment and kid’s activities!
Enter for a chance to win prizes at our booth!

Short Sale Attorney: Short Sale Problem in California

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/ 

Short Sale Pros and Cons


short sale pros and cons from short sale expert Michael Gaddis, J.D.


Short Sale Pros and Cons

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:


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. 


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/ 



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