Friday, February 11, 2011

What do I need to start a short sale?

So you've come to the realization that your financial ship is taking on water. So who do you call?...the Coast Guard to rescue you or a tugboat to rescue the ship? Rescuing the ship would be getting a loan modification or winning the Lotto to allow you to continue to make your payments...Calling the Coast Guard would be consulting with your legal/tax counsel to discuss your tax situation and options available to you.

You ask why do I have to do this...Well...There are nunmerous questions to be answered to determine if you and your property qualify for a short sale and selling real estate short is a legal and financial matter, not a real estate matter.

Selling your home and getting the contract is the easier of the two parts. The most tedious and frustrating is processing the paperwork with the Short Sale Lender. The major goal here is to provide everything they need, upfront without exception, and be prepared to provide the addtional documentation and updates they will request from time to time, which will happen.

An experienced Short Sale Agent will have a list of documentation that the Lender's normally ask for and/or you will have a list from your specific Lender. If one is not available, then I offer this list as a starting point of items definitely needed and some things you may encounter over the term of the Short Sale approval process:

1. Signed and dated listing agreement with commissions listed.

2. Full Multiple Listing Service 'MLS' report from your real estate agent.

3. A Third Party Authorization form - seller signed authorization form for the agent and/or authorized to negotiate with the lender on seller’s behalf.

4. Handwritten hardship letter signed and dated telling your story.

5. A financial statement, basically an income and expense statement.

6. Two (2) months most recent bank statements.

7. Two (2) months of mosdt recent pay stubs or copy of pension/social security award letter.

8. Two (2) years of seller’s most recent tax returns.

9. Complete copy of the signed and dated Purchase Agreement — contract.

10.Pre-approval letter from the Buyer’s new Lender

11.Three recent, like-kind, comparable sales.

12.Estimated HUD1 or pro-forma closing statement provided by escrow.

This should get you onto the 'Yellow Brick Road' but it takes a ral specialist to monitor the Short Sale and keep it moving and I suggest you consult a Realtor to make this a more palatable process ... Short Sale could be a great place to start

Friday, February 4, 2011

Anti-Deficiency Protection for Short Sales

Senate Bill 931, providing California Short Sale Deficiency Protection, will go into effect on January 1, 2011. This new law states that existing lenders of record who have approved and agreed upon a short sale will not be able to obtain a deficiency judgment against the seller after the short sale is completed. After providing written consent to a short sale on a first mortgage or first deed of trust, the lender must accept the proceeds of the sale as full payment and must fully dismiss the remaining balance due on the loan. This law applies only to first mortgage loans secured by one to four residential units. However, this law would not apply if the lender is seeking damages for fraud or waste by the borrower.

Section 580e of the bill reads:

(a) No judgment shall be rendered for any deficiency under a note secured by a first deed of trust or first mortgage for a dwelling of not more than four units, in any case in which the trustor or mortgagor sells the dwelling for less than the remaining amount of the indebtedness due at the time of sale with the written consent of the holder of the first deed of trust or first mortgage. Written consent of the holder of the first deed of trust or first mortgage to that sale shall obligate that holder to accept the sale proceeds as full payment and to fully discharge the remaining amount of the indebtedness on the first deed of trust or first mortgage.

(b) If the trustor or mortgagor commits either fraud with respect to the sale of, or waste with respect to, the real property that secures the first deed of trust or first mortgage, this section shall not limit the ability of the holder of the first deed of trust or first mortgage to seek damages and use existing rights and remedies against the trustor or mortgagor or any third party for fraud or waste.

(c) This section shall not apply if the trustor or mortgagor is a corporation or political subdivision of the state.