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.)

Related articles

• 6 Tips for Buying a Home in a Short Sale(mysanmarcos.wordpress.com)
• 8 Reasons Why You Will Not Buy My Short Sale Listing(massrealestatenews.com)
• Finance Friday: Buying a Short Sale – The Need for Speed(vaned.typepad.com)
• This is what a short sale is(thekeytoyourheart.wordpress.com)
• Banks encourage “short” sales to invigorate economy, public not enthused(warmsouthernbreeze.wordpress.com)

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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Solano County Assessor-Recorder Marc Tonnesen was our guest speaker  at our Solano Association of Realtors meeting on Wednesday September 22, 2010.  He stated that the home values that his department assigned are based on the values established as of January 1, 2010 and therefore, may not be the current values for   home when you receive your tax statement in the next few days.  Also keep in mind that tax values have nothing in common with market values. He often gets calls from home owners who claim that their home is worth more than the tax bill. He will agree with you that your home’s market value is usually far greater.

So how has Solano county faired in tax revenue during this recession? (*Officially declared over per President O’bama and his economic team.)

Tax revenue in  Benicia- in 2008 was up 5.13% ,in 2009 it was down 5.13%, and in 2010 tax revenue is projected to be down 2.78%. In summary Benicia since 2007  Benicia did better than the rest of the county having only lost about 13%. Dixon-in 2008 was down 1.38%, in 2009 down 6.46%, and in 2010 down 1.30% for about 10% total in less revenue . From 2007-2010 Rio Vista was down overall about 17%. Vacaville was down over 11%, Vallejo was down approximately 29%.

What this translates into is another  reduction in taxes for the schools which gets about 52% of the revenues. Since the recession began the county budget has decreased 22% overall. Furthermore over 1,000 commercial and private individuals are appealing their taxes and over 4.5 billion in potential asset value is at risk. Major appeals from Biopharma, Wind farms, and Quarry make up 81% of the risk value of pending property tax appeals.  Per Solano County Assessor-Recorder Marc Tonnesen, the appeal process can take up to two years. Needless to say losing another potential  4.5 billion would have a huge impact on the local economy.

There is some good news. Foreclosures have driven  home  values downward,  but the rate of foreclosures has held steady since August 2009 instead of increasing.  There is a lot  shadow inventory (Foreclosed homes being held by the banks and not on the market), but the bottom of the real estate market may have finally been reached. If true, it will turn gradually increase tax revenues as the home market recovers. This  welcome relief for all except the potential home buyer who didn’t take advantage of the low prices and low interest rates. As tax revenues increase we can expect better schools, roads, parks and recreation and the essential government services that have made Solano county and the overall SF Bay Area the best place to live.

Marc Tonnesen welcomes you to call 707-784-6210 or t e mail him at Assessor@SolanoCounty.com or to visit, during normal business hours on the second floor of the Government Center located at 675 Texas Street, Suite 2700, F airfield, Ca.   You may also visit:   www.solanocounty.com/depts/ar/home.asp if you have questions about your real property taxes.

Keep in mind that his staff  has also been cut but he and his team will do all they can to respond to your needs.

*Do you agree with President Obama and his economic team that the recession is over?

Let’s see, home prices per CNN.Money.com are rising in some areas of the United States and lagging in others. What are the local trends of home sales in your area? You might look at the local real estate trends as provided by Trulia.  Interest rates are so low that only grand parents or great grand parents remember lower rates.  However, the job market appears to be unstable and inventory of foreclosed homes is also rising.  So who is buying a home and why?Most calls I am getting are from investors who believe the bottom has been reached  in our area of California, (Benicia, Danville, Martinez, Alamo, Vallejo) and now have plucked or seized the day (Carpe diem). Investor-buyers are realizing that there is a profit to be made right now with positive cash flow in many cases and security in knowing that the economic up cycle is expected with equity build up in the property.   Are primary or potential owner occupied home buyers simply afraid? Is that the problem? Why are you as a potential home buyer not buying right now?