A Short Sale is unique.  Although you are the homeowner according to the note & or deed recorded when you purchased your home…because the home is selling for “Less” than that original note, the lender/bank now has to approve the terms of the sale and will decide how much of a reduced price will be accepted for the property.  With that, the bank will also decide if they are going to offer money towards closing costs, home warranty, termite…fees etc.

When you are asked to sign a purchase offer, the buyer may ask the “seller” to pay closing costs.  Remember, the bank holding the title has the ultimate say on what will be paid in the transaction. These fees or costs will be paid from the proceeds of the sale.  If approved…the closing costs will be paid from the proceeds.  You as the seller, will not be responsible to pay for the closing costs at close of escrow. This is also true of real estate broker commissions. Commissions are negotiated by the broker and are also paid from the proceeds. Again, you will not be responsible to pay commissions.

Another very important thing to be aware of as the homeowner-

When you list your home for Short Sale, in Fresno you will be asked to sign a Short Sale Listing Addendum.  This form explains the Short Sale process and ultimately allows you to cancel the sale at anytime, for any reason.

What does this mean for you?

If you are not comfortable with the terms the lender has offered as an approval, CANCEL the sale.  You are in complete control.  Do remember that you will have to deal with the possibility of Foreclosure if you refuse the terms as agreed by the bank.

Make sure you have an experienced and trained Short Sale Agent represent you through the sale. Experienced? 10+ closed short sales. Ask to see previous clients Approved short sales.

I have never had a sale approved that the homeowners were not thrilled with.

Jeremy Smiley, Realtor
Short Sale Specialist
London Properties
Fresno, CA
(559)790-8760

Top 10 Fresno Seller Short Sale Questions, Answered.

Number 10
Q. I can’t make my house payments but I do have an ability to pay back all or part of the negative equity. Also, I want to preserve my credit score…is a short sale right for me?
A. Probably not. In cases where the seller can pay back all or part of the negative equity (usually to the 2^nd lien holder) it makes sense for them to work out a repayment plan. The lender will then release the lien and allow the home to close.

Number 9
Q. If I pay mortgage insurance and default on my loan, wouldn’t that cover the deficiency amount?
A. The mortgage insurance is not there for your protection, it protects the mortgage lender.

Number 8
Q. Do I have to have my home ‘Approved’ by my lender prior to offering it for sale as a short sale?
A. No. Technically speaking, there is no such thing as being ‘Short Sale Approved’. The actual approval only happens with an accepted offer.

Number 7
Q. I just missed a payment and I know I will miss more….how long does the foreclosure process take and is there time to do a short sale?
A. The foreclosure process takes differing times depending on your state.  In the Midwest a foreclosure can take over a year. In California it’s taking 6+ months.  Generally speaking a well-priced short sale being processed by an educated short sale listing agent will sell and close in less than 120 days.

Number 6
Q. Will I still have to pay property taxes if I do a short sale?
A. Property taxes will always have to be paid as part of any accepted short sale. Whether it’s you or the lender depends on their policies and the specific agreement you reach while negotiating the short sale.

Number 5
Q. I owe more than my home is worth and I can’t make the payment, do I have to somehow qualify for a short sale?
A. The simple answer is NO. If someone can’t make their payment and they are otherwise insolvent they qualify for a short sale. Note: insolvent simply means their total debts are great than their assets.

Number 4
Q. Do I have to pay income taxes?  I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me..the seller..is this true?!
A. It WAS true, now it’s not. Consult your Tax Attorney or Qualified CPA.  Very recently the tax law was modified and now most people who do a short sale will have no taxes due.

Number 3
Q. How do you, my listing agent get paid?  Who pays your commission?
A.The bank will pay the commission along with all the other usual closing costs.

Number 2
Q. Do I have to miss a payment to do a Short Sale?
A. No. Late last year most major lenders started accepting short sale offers from sellers who have never missed a payment.

Number 1
Q. I want to do a short sale and have a 2nd mortgage, does this make me ineligible?
A. No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid off by the sale, then you just negotiate the terms with the second lender. Most short sales do involve 1^st and 2^nd lien holder.

With that said, he makes many excellent points…points I DO agree with.

Read this and share your comments.

Source: Market-ticker.denninger.net

I’m tired of the repeated bull-crap from the media and various carny barkers about “moral obligations” to meet your payments on underwater property.

Why is it that you have a moral or ethical obligation to BANKS to do this, when THOSE VERY SAME DAMN BANKS ARE WALKING AWAY IN THE SAME FASHION I ADVOCATE?

Dec. 17 (Bloomberg) — Morgan Stanley, the securities firm that spent more than $8 billion on commercial property in 2007, plans to relinquish five San Francisco office buildings to its lender two years after purchasing them from Blackstone Group LP near the top of the market.

The bank has been negotiating an “orderly transfer” of the towers since earlier this year, Alyson Barnes, a Morgan Stanley spokeswoman, said yesterday in a telephone interview. AREA Property Partners will take over the buildings. Barnes declined to say when the transfer will occur.

“This isn’t a default or foreclosure situation,” Barnes said. “We are going to give them the properties to get out of the loan obligation.”

Right.

Seriously, that is almost funny. Banks doing ‘orderly transfers’ of their upside down properties. So, is that going to be what the real estate industry started calling foreclosues….’orderly transfer’?

Exactly as you do when you strategically default on your mortgage, giving the property back to the bank to get out of your loan obligation.

Why is Morgan Stanley doing this?

The Morgan Stanley buildings may have lost as much as 50 percent since the purchase, he estimated.

As a consequence of being “upside down” they are walking away.

This isn’t the first one Morgan Stanley has walked off on either:

Morgan Stanley last month agreed to hand over Crescent to Barclays, ending the firm’s obligation on a $2 billion loan after taking almost $1 billion in losses.

WOW! and somehow normal Joe homeowners are ‘morally obligated’ to keep making payments on their upside down homes….

Let me be 100% clear about this. I DON’T advocate doing strategic defaults…

With that said, I understand why a borrower would want to do this. And..frankly…from a financial perspective…its hard to argue with not getting rid of your own toxic assets. Clearly, the government, Banks, Brokers, The Obama Administration, Brokers….agents…everyone is now pushing for short sales. Clearly, 2010 IS the year of the short sale.

When Morgan Stanley acquired it, Crescent owned 54 office buildings in cities including Dallas, Houston, Denver, Miami and Las Vegas. It also owned the Canyon Ranch spa and resort, residential developments in Scottsdale, Arizona; Vail Valley, Colorado; and Lake Tahoe, California.

Got it?

BANKS – the very same BANKS that people claim you have a MORAL AND ETHICAL OBLIGATION TO PAY EVEN IF YOU ARE UPSIDE DOWN – are walking away (by “negotiation” – as in “do it or we’ll default and you’ll get even less!”) from properties EVEN WHILE THE CARNIVAL BARKERS IN THE PRESS ARGUE IT IS IMMORAL FOR YOU TO DO SO.

In a word: BULLS**T.

This is exactly the same thing – a “strategic default“, which people define as:

“strategic default,” walking away from their mortgages not out of necessity but because they believe it is in their best financial interests.

Morgan Stanley CAN pay, they are simply choosing not to, because the property has fallen in value.

This is exactly identical to you choosing not to pay because YOUR HOUSE has fallen in value.

Excellent point!

George Brenkert, a professor of business ethics at Georgetown University, says borrowers who can pay — and weren’t deceived by the lender about the nature of the loan — have a moral responsibility to keep paying. It would be disastrous for the economy if Americans concluded they were free to walk away from such commitments, he says.

Really?

I called Mr. Brenkert and spoke with him for a while this afternoon, and pointed out the above – that the asymmetry of position here is untenable and is in fact a big part of why we’re in this mess.

Let’s be clear: Those arguing for this from the banking and regulatory industry know how you stop people from “Strategically Defaulting” – don’t give people loans that make such an option attractive!

Note: state laws…not mortgage terms dictate this.

If we had only 20% down 30 year fully-amortizing fixed-rate loans in the mortgage business nobody in their right mind would strategically default, because they would lose their 20% and even if prices declined they would likely (with amortization) be either ahead or darn close to it – that is they’d lose actual money.

But on the business side of things we allow companies to set up separate LLCs and then trade on the “parent” credit even though there is no recourse to the parent.  This allows firms like Morgan (or the builder down here near me that has a bunch of these shell LLCs) to build and buy huge amounts of real estate – yet when something goes wrong they have tremendous leverage on a short sale, put-back or simple walk-off: if the lender doesn’t like it they’ll bankrupt the “container” LLC and the lender will get nothing.

Consumers, of course, can’t do that.  Try to set up a LLC and then use it as a vehicle to buy a house without a personal guarantee associated with the loan.

Forget it.

Try to get a small business loan with only the business as the collateral – no personal guarantee.

Forget it.

It is therefore my contention – and on this point Mr. Brenkert agreed – that the rules must be consistent for everyone, and if big business can strategically default on their obligations for profit (rather than for hardship) then consumers should be able to do so as well.

Therefore, until the law is changed to prohibit the use of said “Strategic” legal containers and the resulting option of business interests – including the banks that are complaining now – to practice selective default when it suits them I stand by my original view:

Strategic Default, in today’s economic, legal and ethical environment, is perfectly within the rights of consumers and they should exercise that right when it makes economic sense, after consultation with both legal and accounting professionals.

Jeremy Smiley, Realtor
Short Sale Specialist
London Properties
Fresno, CA