Article 13 of REALTORS® code of ethics: REALTORS® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it.
Disclaimer: Nothing in blog is intended to constitute legal advice. This material is intended to give prospective buyers/sellers an overview of the short sale process and from the view of the real estate practitioner.
Multiple Listing Services must give participants the ability to disclose to other participants any potential for a short sale. In any instance where a participant discloses a potential short sale, they must also be permitted to communicate to other participants how any reduction in the gross commission established in the listing contract required by the lender as a condition of approving the sale will be apportioned between listing and cooperating participants. All confidential disclosures and confidential information related to short sales must be communicated through dedicated fields or confidential “remarks” available only to participants and subscribers.
Mortgage Forgiveness Debt Relief Act of 2007 The new law passed in Dec. 2007, on the taxpayer’s principal residence up to $2 million of qualifying mortgage debt forgiven in 2007, 2008 or 2009 will not be treated as income for the taxpayer. Exclusion applies only to “acquisition indebtedness”. For a married person filing a separate return the limit is $1 million mortgage debt reduced/forgiven through restructuring qualify for the tax exclusion.
Such as
• a workout
• a short sale
• a foreclosure
Short Sale is a transaction of title transfers; where the purchase price does not bring sufficient liquid assets to closing to satisfy all deficiencies.
An advertized short sale MLS listing is where the seller has given the listing agent written permission to communicate with the loan servicer. The listing agent has reason to believe the purchase price may not cover payment of all liens and costs of sale and the seller due to a hardship is unable to bring sufficient liquid assets to the closing. The Lender(s) have claimed they will entertain a short sale package.
Important Note for sellers: many troubled loans today are “stated income loans” and/or “subprime loans”. Representations that were made on the initial loan application may be scrutinized in the short sale package process. So, if the seller on the original loan application represented his income was $8,000/month and on the short sale application represents his income went from a recently high of $3,000/month to $2,000/month, this may raise questions that may expose themselves to charges of loan fraud.
Sellers please consult with an attorney before completing a short sale application.
THE SHORT SALE and or a foreclosure can be a catastrophic event for any property owner. The property owner will have legal, credit, and tax implications and may be clueless to the ever changing legal, credit, and tax environment.
The seller is not always aware of the total debt, and may minimize or misstate it. Sellers may not have been aware they were about to lose their homes. Hopelessness can lead to irrational and or untrustworthy actions. The short sale sellers purchased or borrowed in a rising market or high in the falling market and now have negative equity. When the seller discovers the short sale effect on their credit, there is little incentive for a seller to cooperate with a short sale except for peace of mind. They may have borrowed $500k on a real property that is now valued at $400K today. By no means does this mean the buyer of this short sale would gain $100k in equity if purchased at $400K. It means the seller owes too much.
Lenders aren't naive or unaware of the value of a home. Lenders will insist on a comparative market analysis or broker price opinion. That price will be close to market value. Lenders are more apt to accept short sales when the package is worth “as is” market value. But it still could take anywhere from two weeks to two months and longer to get a response on the package. Short Sales do not have to close by the buyers’ specified date. A short sale closing process takes an indefinite amount of time, with the seller's lender calling the shots. If there are two loans secured to the property, it could take longer to satisfy the demands of the second lender. Lenders generally have lawyers at their disposal. Some may even reserve the right to renegotiate the terms of the short sale at the last minute, should the market change, new laws pass or new information appear? Lenders rarely will pay for any extras, like a seller alone maybe willing to do. Lenders may even refuse to pay for standard seller closing costs such as transfer taxes. The importance of knowing how much is owed on the property and whether the seller is in default on any mortgage lien(s), has any legal action been taken by the lien holder, are there unpaid taxes or association dues? All must be researched when you purchase a short sale. You may be acquiring liens and unpaid dues in your purchase. There are short sales listing that do not even qualify for a short sale. This might happen simply by poor communications or lack of knowledge, to unethical practices. How ever it happens, there maybe a long wait for the bank to deny the short sale that the bank never gave the go-a-head for in the first place. Every lender is different, and each short sale package can be different as well.
A short sale is one where title has transferred; where the sales price was insufficient to pay the total of all liens and costs of sale; and where the seller did not bring sufficient liquid assets to the closing to cure all deficiencies
General elements of a complete short sale package are:
· The seller must be cooperative and willing to work with the REALTOR to package the short sale. The seller should also explicitly acknowledge that the seller will receive no proceeds in a short sale; the seller is responsible for all the usual disclosures. The seller is the owner of the property and the seller will be conveying title.
· The seller must give written authorization verifying that the REALTOR has permission to speak with the lender on the seller’s behalf.
· The seller must have developed some hardship that makes it impossible or extremely impractical for the seller to keep the property. A hardship letter written by the seller describing the seller’s circumstances will be needed.
· The lender is contacted and has expresses willingness to entertain a short sale. The lender will not be the client, but understand that the lender has the final decision.
· The property is listed, with appropriate caveats, marketed and properly priced.
· All offers must be submitted to the seller; an offer that is accepted by the seller will be presented as a completed short sale package to the lender as necessary and desirable. Lenders may require in writing that all offers be submitted to them as well, as a condition of reviewing the short sale package.
· The sellers’ completed and signed IRS Form 4506, "Request for Copy of Tax Form”.
· Sellers’ completed and signed personal financial worksheet. This will include assets such as other real estate, stocks, bonds, 401Ks, etc.
· Sellers Tax returns for the previous two years.
· Sellers’ Employment paycheck stubs for the past two months. Profit and Loss statement (if the seller is self-employed).
· Sellers’ Bank statements for the past two to three months.
· A CMA and/or BPO shows property market value may come up short of the assets needed to satisfy the loan.
· A preliminary title report.
· A copy of the purchase contract and all supporting documents signed by both the buyer and seller. Offers to purchase the property would need the same caveat regarding lender approval. Should the lender disapprove the short sale package? A frustrated buyer may look for specific performance or damages suit against the seller agreeing unconditionally to sell the home
· A copy of the certified escrow instructions. Written proof of the buyer's ability to purchase the property, i.e., a completed loan application, pre-approval by a lender or evidence of cash on hand (a current bank statement).
· An estimated net/closing statement (HUD-1) certified by an escrow officer who is acceptable to the lender
It is so important: that the estimated closing statement be accurate. If the lender approves the short sale, they will not care what problems you might have closing the escrow on time, or what unanticipated costs you face. There will simply be a dollar amount that will need to be available at the close of escrow.
The lender can do one of several things up on receiving a package.
Important Note: If there are multiple loans, you will repeat this process for each lender
For sale by owner: FSBO (For Sale by Owner)
Only 13% of sellers did not use a Licensed Real Estate Agent and sold FSBO in 2008. 59% said they did not want to pay a commission, 42% used yard signs, and 27% are on the internet. 45% of FSBO’s knew the buyer before the transaction. 38% of the transactions that new the buyer said they would use an agent next time. Of the FSBO’s that did not know the buyer 21% also said they would use an agent the next time.
Only 12% of FSBO’s said getting the price right was the most difficult part. How did the 88% come up with their price so easily? Pricing your property correctly is crucial to the sale of the property. Knowing the current market, allows REALTORS to generate the most comprehensive picture for forming a fair market price for the property.
For Sale by Agent:
81% of buyers purchased through an agent in 2008 and 84% of seller sold through an agent in 2008.
I, like most REALTORS® do FREE CMA’s (Comparative Market Analysis) for home owners with the vision of listing their home for sale on the MLS. As a REALTOR I have the tools to give an analysis for your home based on recent comparable home sales.
In 2008 94% of 25 to 44 year olds and 87% of all buyer searched for homes on the internet. The internet was the first step for 1/3 of them. 4 out of 5 view their agent as a valuable information source.
Buyers: If you’re pre-approved or qualified to buy and interested in single family home(s) listed as a Citrus County FSBO’s send me a link to the ad or add a link to this blog. If there is a name for owner or address, phone number or anything that will lead me to the properties public records. I will for Free provide you with the public information on the property(s).
If you were to sign a buyer’s agreement with me on that property, I will represent you as a Licensed Real Estate Agent and REALTOR®. If you are thinking, that because these FSBO’s are not hiring a REALTOR®, that you will get a better deal well… I’d say the majority are not better deals. I just looked up several today, some on free listing sites like craigslist. One of properties is listed for $139,500, claims to be a treasure reduced from $239,500. But when I checked, county tax records show a 1958 home Direct Sale Estimate is only $51,200. The last like property in the neighborhood that sold over $100K on the MLS sold in May of 2006. It may be the greatest 1958 home in the neighborhood; still I believe you should know before you invest. Today it pays to have a REALTOR at your side every step of the process. What do you think? All of the For Sale by Owners I looked at today are over priced. Pick one send me a link. We’ll test it!
Florida property owners, hold title to their property. This means they own it. The Bank and others may have a lean on the property and potentially may force a sale. But as the property owner they may do with it as they see fit within deed restrictions, home owners association, zoning rules etc.. They can advertise its worth what ever they like. I do Free CMA’s. There are some FSBO’s that use this free service with no intent on listing with a REALTOR. No problem but lets be honest with the REALTOR as to what your intentions are. So I now offer a free FSBO check to buyers of single family homes in Citrus County.
Know the facts before you buy.
Give me a call at 352-302-8771 or email me at info@FlBob.com
Selecting an Exceptional REALTOR® in Citrus County Florida
Branding:
Everyone is sold that they want the brand, bignamedotcom. Branding give you the idea you have a trustable service. You feel like you know them before you enter the door. When you brand, you do so by doing your best at everything you do leads back to your trusted brand.
I just now Googled a simple “property for sale”. Did any house hold brand name real estate brokerages show up on pages one, two or three? A side for one paid brand name advertisement the answer is… no. Realtors.com did how ever. All REALTOR regardless of brand big or small have to ability to list your home on realtor.com. Realtor’s may or may not list your home on realtor.com though for many good and poor reasons. A good reason: You the homeowner are concerned about security and do not wish to have it published on the internet. A poor reason: Your listing agent believes he can find the buyer singlehanded to take the listing and the selling side of the sales commission. The problem is a co-operating brokerage may have had a buyer sooner. Now here is my advice. Google your agent of choice’s name, Google your agent’s cell phone number. Did you find them on page one. If so they are doing a good job at branding them selves telling the world “Here I Am” before my friends or enemies.
I believe strongly in listing on realtor.com. I list on the MLS and a little over a dozen other listing website.
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