Short Sale Law, Anti-Deficiency Law Leveraging the law to your advantage. CA Short Sale Law.

What are the seven things lenders fear?

1.       Informed borrowers who utilize the full force of California anti – deficiency protections.

2.       Informed borrowers who have attorneys review their short sale terms.  (many banks accept the short sale and then pursue the borrowers for the deficiency later.      

3.       Borrowers who decide to assert their legal rights prior to going into default on their loans.  (or starting a short sale.)

4.       Sellers who care enough about their assets or future earnings to ensure they have lawyer doing the negotiating or at least monitoriing the sale.     

5.       Homeowners who hire experienced negotiators.   

6.       Homeowners who request the lenders produce proof of ownership of the the loans.     

7.       Homeowners who ask Bank of America to prove BofA or Countrywide made the proper lending disclosures. 

Upside Down?

1.       Ask for a copy of the the California Association of Realtors Short Sale Listing Addendum  a day or two before your listing appointment. If you do not get time to read it and ahead of time, refuse to sign anything until you do.       

2.       Ask your “Short Sale Expert” home many short sales he or she has closed in the last six months. (It’s never too late to find out.)

3.       A California homeowner should ask to see the Realtor's five most recent short sale approval letters.  Then determine what exactly was released?  

4.       Ask your Realtor to put his or her advice in writing:

        Taxes owed to IRS and the CA franchise tax board? 

        Written releases from the deficiency from all lenders and third party insurers?

        Note: The mortgage debt forgiveness act does not protect you from your lender or the CA Franchise Tax Board.    

5.       Ask who reviews the legal releases and advise the seller to go to closing?   

6.       Ask is it better to stay current with senior loan or junior loan under California law and why?

7.       Ask your short sale expert why a homeowner with “Purchase Money Loans” might want to take a foreclosure rather than risk being responsible for loan balances? 

8.       Is it ever better to let an investor buy your property?     

9.       Ask your short sale expert when he or she closed their first short sale?  Get the mls number.

10.   Ask what percentage of your short sale listings have closed?

11.  Ask when is is not so smart to turn over your financial information to the lender?

12.   Ask for a comprehensive workout plan in case this short sale does not work out?

Should you hire a short sale “expert” to stop your foreclosure? 

Many short sale experts would have you believe that a short sale is the cure all for your upside down real estate problems.  But, that is not necessarily true, there are all sorts of complications which few Realtors understand or explain:

1.  Lenders such as Bank of America and other lenders may not release you from your remaining loan balances.  However if you are able to explain the correct law to them, they may give you a side agreement.  
2. After a short sale you will get a 1099 for the deficiency.  Make sure you understand your tax exposure before you sign your short sale paperwork.   The mortgage debt forgivness act does not appy to California.  (As of October 2009.)    
   
3.  Note that the National Association for Realtors recently stated that approximately 90% of properties listed as short sales turn into foreclosures.  How can that be when there are so many "short sale experts" running around?  If you short sale team has not closed at least 10 short sales and has not closed more that 50% of their short sales, perhaps you should be looking elsewhere.   
4. If you are not released from the deficiency in writing , do you have you a  back up plan?   
5. On the flip side some Realtors brag about 98% success ratios?  Others have bragged about getting all their clients released from deficiency in writing.  These claims are almost surely the work of people not interested in your well being.  Oddly, some of these Realtors provide their short sale approval letters right on their site.  As you read the approval letters you will see many of the approval letters make no mention of a release from the remaining loan balance.  (A release of lien is not a release of the remaining loan balance.  A release of mortgage complicates matters.)
6. Should a short sale expert understand that some lenders are pursuing the deficiency after a short sale?  Should a short sale expert undersand the legal side of a short sale negotiation?  Real Short Sale experts have attorneys on your team. 
7. All these recent bank bailouts have embolden the lenders to make your loan workout options less desirable.  Prior to the bank bailouts, many lenders agreed to release the sellers from deficiencies in writing.  Now negotiations are much tougher.  
8. Do you realize that many prominent Real Estate trainers are telling Realtors they must market for short sale listings.  Some trainers advise Realtors to claim the title of short sale expert during short sale training classes.   Unfortunately, no one is there to protect the consumer from marketing hype.  Our advice – trust but verify.  I would say there are only a handful a Realtors who really deserve the title short sale "compentent" and I wonder if any should be claiming expertise.    (Lawyers can not claim to be short sale experts.)  Since I am both a lawyer and Real Estate broker I will avoid the expert designation. 
   

If you wish to determine whether a short sale is for you click here .

Walking Away or Accepting a foreclosure.  Sometimes a foreclosure is the much safer and much less expensive option, find out if you can walk away safely with our Walk Away Plan.

1. Foreclosure timeline
2. IRS info regarding non recourse loans vs recourse loans
3. Suggestions on steps you may wish to take prior to commencing a walk away or short sale. 
4. Why a short sale will not save your credit score but it may help your credit history.  A short sale and a foreclosure do the same damage to your credit according to the FICO people.  But, find out why that may not be true for everyone. 
5. more...

Loan Modification

1. Whether principle reduction on your senior loan is likely.
2. What you can do make sure your second lender is powerless to collect against you.
3. When principle reduction on your second is likely.
4. How will a loan mod effect your credit?
5. more...

Short Payoff for  Junior Loan

1. Find out why some california home owners are forcing the second lender to settle for 20 cents on the dollar or less.
2. Find out when a short payoff makes sense as a first step, prior to short sale or walk away. 
3. Find out what a effect a short payoff will have on your credit.
4. Find out why it may be smarter to stay current with your first prior to foreclosure

Deed in Lieu

1. What is a deed in lieu?
2. Does a deed in lieu mean an automatic release for a deficiency
3. Do you always have to attempt a short sale prior to negotiating a deed in lieu?
4. If you are going list the property, how long is the listing and at what price?
5. What should you watch out for in a Deed in lieu?

Short sales – should only be listed by experienced Brokers

1. Find out why most Real Estate agents do not have the skill set or team in place to get a short sale done.
2. In a well negotiated short sale the lender pays for the Realtor fees and the lender may absorb delinquent property taxes.  But, what about HOAs and bonds?  
3. In our opinion if your Real Estate agent does not have someone in their office calling the lenders in a proactive manner your odds of success go down dramatically.  Most realtors do not even have their own office.  Short Sale negotiations are not for amateurs or part timers.  
4. Without experience negotiating short sales how is your Realtor going to know when and how to counter the buyers and the Lenders.  This not even close to a typical real estate transaction.  Our brokerage has closed dozens and dozens of short sales and we are still improving our techniques.  (and adjusting to the lenders always changing procedures.)
5. Without experience, how is your Realtor going to know how to "stack" your short sale package so that it has the best shot at getting through the lender's screeners?   
6. Countrywide told us they get 100,000 faxes a day, Chase told us they get 1500 new short sale offers a day.   Bank of America is overwhelmed.   If you agent does have the experience or legal clout how do you know your offer will not sit on the bottom pile.  All the while the foreclosure countdown is ticking away.  Wouldn't it be smart to have an attorney poised to fire off letters at the right time to the right place?
7. See our list of recent short sales in the San Diego area alone.  We know how to get short sales done. 
8. Find out why so many Realtors do not know how to price a short sale listing.
9. In short you need a Realtor, an experienced short sale negotiator and lawyer on your team. 
10. Does your Realtor have the experience to know when and how to push the lender for better short sale terms.  Did you know that many lenders are asking the sellers to contribute 10% or more of the deficiency to the closing?  And some of the lenders releases do not release the seller from liability for the remaining loan balance. 
11. Does your Realtor know who to sell homes in a down market?
12. Does your Realtor know what to do when the lender agrees to so a short sale on their terms, not yours?

You may also wish to consider gaining a tactical and perhaps even legal advantage against your lender with a RESPA request or Loan Audit

1. Some lenders can’t prove they own the loans.
2. Some loan servicers can not prove they are legally entitled to service your loans.
3. Some lenders have appraisal issues.
4. Some trustees can’t prove they have a right to foreclose.
5. We have used RESPA requests and loan audits to gain leverage against the lenders.  Is this important, it may be if you have future assets to protect.   

Now the good news about short sales and loan workouts.

With the right workout plan, you may   

1. Minimize or eliminate your liability for your remaining loan balance.
2. Minimize the damage to your credit or your ability to buy a new home.
3. Minimize or eliminate your tax liability to the IRS or the California Franchise Tax Board.
4. If you list for a short sale the bank pays your comissions. 

Call (760) 896-HOME  or (800) 608-8311 for your free 5-15 minute consultation.

Or fill out this from for our free California guide to Successful Short Sales.