Short Sale Nitty Gritty

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Brokers and agents learn the tricks to closing short sales and how to avoid the legal pitfalls.

Brokers and agents learn the tricks to closing short sales and how to avoid the legal pitfalls.

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  • 1. CENTURY LAW GROUP LLP FOR ALL YOUR REAL ESTATE NEEDS * REAL ESTATE TRANSACTIONS * REAL ESTATE LITIGATION * BROKER DEFENSE * BROKER NEGLIGENCE * BUSINESS LITIGATION * SHORT SALES SAN JOSE: (408) 300-0340 | WWW.DREDEFENSE.COM
  • 2. Short Sale Nitty Gritty: Tricks to Closing Short Sales How to Make Money in the Booming Short Sale Market
  • 3.
    • Loan Modification History:
    • 2008 – Economic “doomsday” serves as catalyst for boom of the Loan Modification industry
    • 8-12% of modifications presented are actually modified
    • 3. SB 94 and the death of the Advanced Fee (October 2009)
    • 4. DRE Prosecutions
  • 4. Foreclosure Prevention Litigation
    • Temporary Restraining Orders
      • Power of “bad faith” argument
      • Case Studies
        • Gilroy case
        • Dual agency
        • challenge
  • 5. Short Sales
    • Negotiating down or eliminating recourse
    • Lessening tax consequences
    • 1% gross: HUD-1
    • Using “bad faith” litigation as leverage
    • Disclosures that protect the agent/broker
    • Safeguard agent commissions
  • 6. Short Sale Nightmares
    • Non-compliance with HUD-1s
    • Failure to disclose recourse
  • 7. Lawsuits Over Short Sales Dramatic increase in lawsuits over Short Sales!
    • Lawsuits are the result of a variety of different SS scenarios:
      • Lender did not absolve/relieve the debt (deficiency)
      • Seller received a 1099-S for the deficit
      • Broker/Agent gave legal, financial and/or tax advice
      • Broker/Agent acted outside scope of their expertise
      • Broker/Agent did not explore nor provide loan modification options
      • Broker/Agent misguided client on the impact of SS on credit score
  • 8. Handling the Client Interview
    • Find out homeowner’s hardship
    • Determine objectives
    • Manage expectations (DON’T sugarcoat)
    • Primary Residence?
    • Behind on Payments?
    • How many loans/liens?
  • 9. Short Sale Preparation (From Listing Agent)
    • Listing Agreement with Short Sale Addendum
    • CMA (comparable market analysis) or BPO
    • Estimated HUD: disclose all fees
    • Complete Short Sale Packet from Seller
    • Complete Purchase Offer Packet (from Buyer’s Agent)
  • 10. Documents Required from Seller
    • Completed & signed Lender Short Sale packet including 4506-T form
    • Signed financial hardship letter
    • All financials: Copies of most recent paycheck stubs, bank statements, and other assets
    • 2009 federal tax return (include all pages & schedules). Signed & executed pg. 2 of the 1040
    • Expenses: Itemize monthly expenses (i.e. utility bills, car payments, insurance, credit cards etc.)
    • Copy of mortgage statement with property tax bill & hazard statement
  • 11. Short Sale Preparation (From Buyer’s Agent)
    • Fully executed purchase agreement with Short Sale Addendum & counter offers
    • Signed pre-approval letter from Buyer’s Lender
    • Buyer’s proof of funds to close escrow
  • 12. What Lenders look for:
    • Complete & Accurate Short Sale package
      • Treat short sale like regular sales transaction
      • DATE all documents
    • Net Proceeds (profit)
    • Junior liens on property?
      • NEVER tell Lender you “don’t know”
    • Documents Supporting Market Value
      • CMA/BPO
      • Appraisal report from Buyer’s Lender
    • Buyer (agent) assure close of escrow
      • Buyer’s contingency removal
  • 13. Tips & Tricks of Negotiating Short Sales
    • Highlight the positives of SS file to Lender
    • Exceed typical 10% down payment or full cash offer
    • No seller concessions or buyer’s assistance
    • Buyer waives termite report and repairs
  • 14. Short Sale Approval Deficiency Judgment Nightmares
    • Mortgage Lender & its investors may pursue a deficiency judgment …
    • Lender approves SS, but acceptance is conditional upon receipt of a minimum payment $____ to settle account and release liens …
    • SS approval “precludes Lender from pursuing subsequent deficiency …”
    • “… the bank will release the lien and charge off the remaining debit as a collectable balance”
    • “ Customer will still be responsible for all deficiency balances per the terms of the original loan documents …”
  • 15. Summary
    • Short sales are now the #1 segment in distressed property 
    • Lenders try to force lower agent commissions
    • CA short sales can have big tax consequences for distressed homeowner
    • DRE issue: Negotiating a short sale borders on the practice of law
  • 16. CENTURY LAW GROUP LLP FOR ALLYOUR REAL ESTATE NEEDS Visit us at DREdefense.com download our complete Short Sale intake packet Contact: Gabriela Ocampo (310) 642-6900