Why so many short sales?

The combination of falling home prices and homes financed with low down payments means many homeowners owe more on their properties than they’re currently worth. Add to that the population of homeowners who face foreclosure due to resetting mortgages or who must sell for other life reasons (relocation, etc.) in the middle of a bad market, and it makes sense that lenders hoping to avoid more foreclosures on the books will take this alternative. If someone is unable to refinance or do a loan modification then the short sale is a much better option to foreclosure.

The landscape is in constant change.

The amount of time a lender can take is one of the most important things the consumer needs to know. Any buyer looking at a short sale property should find out where the seller is in terms of discussions with their lender. If a buyer is patient, they can snag a good deal on a home.

Before you think about asking your lender to consider a short sale, it would be a good idea to get your paperwork lined up.

Be ready to show the lender you are serious about your situation. Get together a hardship letter (an honest explanation of your financial situation and how it occurred), pay stubs, bank statements, tax returns, an appraisal and documentation of your debts.

3 critical safeguards:

If you’re considering a short sale, experts advise you to take the following steps to meet potential negative consequences head-on.

1. Get it in writing. Make sure the lender agrees in writing that the short sale will absolve all debts.

If they owe $300,000 on the house and the short sale is for $280,000, is there any possible way that the lender’s going to come after them for the $20,000? Most lenders will put that in the agreement that they’re not going to come after the deficiency.

2. Protect your credit rating. Ask the lender how it will report the short sale on your credit report.

Most of the time, a short sale shows simply that a debt is satisfied. But theoretically, a short sale could reflect on the credit report as ‘settled for less than the full balance’. Such a designation is a negative mark on your credit report, though it wouldn’t hurt your credit as much as a foreclosure would.

3. Get professional tax advice. Short sales often have tax repercussions, since lenders can claim the forgiven debt as income that they provided you. That means if you agreed to a short sale for $50,000 less than what you owed the lender, the lender could issue you a 1099 for $50,000, which you would have to pay taxes on.

Your North Orange County Escrow Corp team is in place to assist you through a short sale escrow. There are some special requirements, so be sure to discuss the transaction thoroughly with your North Orange County Escrow Corp. escrow officer when you open your escrow transaction.

North Orange County Escrow Corp’s friendly and helpful team represents the parties to the transaction with attention to today’s privacy laws and requirements. For further information and all your real estate escrow needs, please contact us at 714-526-5400. We look forward to servicing your escrow transactions.

This information is provided by North Orange County Escrow Corp.; however, we encourage you to consult legal counsel and a tax advisor for further clarification.

North Orange County Escrow

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.

The information in this blog is provided for informational purposes only. We recommend anyone going through a short sale or foreclosure to consult a licensed real estate attorney for advice.

North Orange County Escrow

Regulations and poor market conditions have changed business practices over the past several years, but that doesn’t have to be a negative.

This year’s regulatory environment has created a business atmosphere altogether different from what the industry knew as recently as 2009.  Now, additional changes are coming down the pike through the Dodd-Frank Consumer Financial Protection Bureau and Truth-in-Lending Act disclosure revisions.

When you stand in our business and look at the horizon, you can get a little scared.  While some agent’s initial reaction to the new environment may be to hunker down and wait out the storm, especially in light of the current economic conditions yielding low revenues, slow movement of the market, now is the time North Orange County Escrow and our strong relationships with so many of the top real estate agents in the community, will show signs of strength.

Because the new federal regulations taking shape are dictated by the idea of consumer protection, we at North Orange County Escrow have embraced our role as escrow agent and we communicate that the real estate transaction process and those involved in it are worthy of consumers’ trust.

Due to current market conditions, some of the usual players have come to be replaced by new faces.  Your seller is just as likely to be a bank as it is an individual today.  Or perhaps it’s a short sale, which puts new pressure on the transaction.  So while the closing has always been a high-anxiety environment and it’s always been a concerted effort, the microscope is focused on those closings in new ways, both by virtue of the players now involved in new roles and also in how the consumers are approaching it.

As a Real Estate Professional, or as the Consumer, it’s imperative that you are working with an Escrow Company that understands todays market and how the closing is constructed and completed.  You must consider who is actually conducting your closing.

As one of the oldest independent escrow companies in North Orange County, North Orange County Escrow Corp offers an unparalleled depth and quality of services.  The company’s comprehensive experience and expertise is what make us the choice throughout Orange County.

North Orange County Escrow is a fully licensed escrow company, regulated and licensed by the Department of Corporations, State of California, license number 963-1300.  For more information, contact our office and speak to one of our professional escrow officers.  714-526-5400

North Orange County Escrow