LAW AGAINST SHORT SALE DEFICIENCIES EXPANDED
In a major victory for REALTORS®, Governor Brown signed into law today a C.A.R.-sponsored bill, Senate Bill 458, prohibiting a deficiency after a short sale for one-to-four residential units, regardless of whether the lender is a senior or junior lienholder. Effective immediately for transactions closing escrow from this day forward, both senior and junior lienholders cannot require a borrower to owe or pay for a deficiency in a short sale. This law also prohibits any deficiency judgment to be requested or rendered for senior or junior liens after a short sale of one-to-four residential units. Any purported waiver of this rule shall be void and against public policy.

Although a lender cannot require a borrower to pay any additional compensation in exchange for a short sale approval, the new law does not prohibit a borrower from voluntarily offering a monetary contribution to a lender in hopes of obtaining a short sale. A lender is also permitted under the new law to negotiate for a contribution from someone other than the borrower, such as other lenders, agents, relatives, and the like.

Exceptions to the new law include a lender seeking damages for a borrower’s fraud or waste; a borrower that is a corporation, LLC, limited partnership, or political subdivision of the state; a lien secured by a bond as specified; a public utility lien; and additional rules apply if a note is cross-collateralized by more than one property.

This law is fully set forth as Senate Bill 458 (Corbett) at www.leginfo.ca.gov.

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The short sale is quickly becoming the norm for real estate transactions.  Unfortunately, that doesn’t mean that there are standardized forms and procedures.  Every lender has its own set of standards, forms, and guidelines. However, one can expect the seller of a short sale and the sellers’ listing agent to provide: tax form T4506, hardship letter, listing agreement, sales agreement, 2 years tax returns, 2 months most recent pay checks, a copy of a utility bill, two months most recent bank accounts, an account of assets and liabilities, a monthly budget, arms length transaction statement and a  Dodd-Frank form.  This will get you started.

The selling agent must also be prepared to provide more detailed information about their buyers than usual. For example: social security numbers, pre-qual letter, and proof of funds, current address, and an arms length transaction statement that is specific to the seller’s lender.

Once all this data is collected and submitted to  the first mortgage holder and the second mortgage holder then negotiation begins.

The first usually offers to pay the second a nominal amount. The second either accepts, or rejects and perhaps counters. Sounds simple but it may take weeks to come to an agreement….or not.

Only 3 of 5 short sales actually are successful at this time. (Is the glass half empty or half full?)  Its best to prepare for the worst case. Your seller should be packing for a move one way or the other.

If a short sale lender  is using a 3rd party transaction site like Equator.com then the process might be a little easier. Agents have many complaints about the system, but its probably the best that is available.  Bank of America,  Chase and Nationstar all use Equator with more lenders expected to join in the future.

You can expect to take about 60-90 days on average for the short sale process. That’s about twice as long as a regular non short sale.

Sellers shouldn’t accept offers that are too far below the current market as the lenders that hold the mortgages do order evaluations and will reject short sales that are significantly below the market.  Many investors are making multiple offers with the expectation of being rejected and are very happy when an offer they didn’t expect to be successful is accepted. Most of the time the offer is not accepted and the seller has lost valuable time on an unrealistic offer.

Buyers and sellers should realize that today’s real estate professionals are working twice as hard for half as much under much less than ideal situations. 

Patience is the key.  If your a seller, always consult with an attorney and a professional tax consultant. The Realtor does not have the expertise to answer legal or tax questions.

(Rick Dillion serves Solano, Napa and Contra Costa counties.)

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“My credit is ruined. I am months behind on my mortgage payments, credit cards, and I can’t even pay my water bill. ” said a upside down homeowner. “I lost my job, my car was repossesed. Then the mortgage payment increased. Why should I worry about a short sale?”

Well, many homeownersdon’t worry about it.  They don’t answer the telephone or return calls.  They are in denial of the situation and just maybe it will just go away.  But there is light at the end of the tunnel and it doesn’t have to be the REO Train.  Under HAFA rules the homeowner will get up to $3000 for moving expenses if the homowner qualifies.  Losing a job certainly does.  Also, bouncing back financially and becoming credit worthy will take only about two years with a short sale but over seven years with a foreclosure.  A HAFA short sale also extends the time period for the homeowner to stay in the home as the auction date is extended.

HAFA rules that had been established  are changing. The latest rule change is that you now can qualify for HAFA even if you have already vacated the home.

Why do the banks like HAFA short sales over foreclosures?   The banks are trying to avoid the higher cost of the foreclosure process and the legal entanglements that go along with it. The banks are now realizing the value of the short sale process.  This wasn’t the case a few months ago. 

Take action as time is of the essence. Call your local HAFA certified or Short Sale & Foreclosure (SFR) certified Realtor today to see if you qualify for a HAFA short sale.

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Market Conditions for real estate are improving for Benicia, California, located in Solano county about 35 miles northeast of San Francisco. The bottom appears to have been reached and home values are slowly rebounding.  It is good news if the current trend continues for all homeowners and local governments, as increasing values will help with local tax coffers, and provide government services that have been curtailed or downsized. 

The number of foreclosed properties has also dropped, which is most likely reflected in the temporary halt of foreclosures by the banks last month.  Bank of America confirmed that they are presently slowing the foreclosure process in the area. 

Meanwhile HUD has announced a new website for current market conditions by metro areas. (http://www.huduser.org/portal/MCCharts/marketReports.html )    The site was under construction when I checked it out on November 23, 2010.

Here are the latest statistics for Benicia, California as provided by BARIES mls.

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The Home Affordable Foreclosure Altenatives Program (HAFA) is beginning to take shape as more real estate professionals aquire the knowledge of this new program to make it easier for the destressed borrower to sell his/her home by a more streamlined short sale method.

The problem  with short sales has been the length of time it takes to finally close the transaction.  The biggest issue with short sales was just getting the investor to approve or not approve the short sale. After months of waiting for a response, many buyers give up and pull out of the deal.  This should no longer be the case as a standardized form called the  Request for Approval of Short Sale (RASS) along with a completed contract of sale, and a completed short sale package from the listing agent to the servicer of the loan in default, should result in an approval or denial within 10 business days after submission of the package.  Furthermore the whole process is being revamped with standardized forms as much as possible throughout the nation.  Fannie Mae and Freddie Mac have also adopted and adapted guidelines to the HAFA program.

There are no true “experts” in this process but there are now  Realtors @ who are certified short sale specialist that have completed the educational requirements to help sellers and buyers in the new HAFA short sale process.

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