San Diego Short Sales, Loan Modification Attorney, Walk Away

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Before you get started on a short sale or any other loan workout you need to know the answers to a series of questions. Some of the questions you should consider asking are:

1. Do you have recourse or non recourse loans. (in other words can the lenders recover the short fall if you take a foreclosure?

2. What will you tax liablity be to the Federal Government?

3. What will you tax liability be to the California Franchise Tax board?

4. What will the credit consequences of your loan workout be? Will disputing the debt help you?

5. If you have two loans should you consider staying current with the first and negotiating a short pay with the second?

6. How many short sales has your Realtor completed recently?

7. What will you do if your lender requires a contribution of 20% of the laon balance? What will you do if the lender refuses to release you from the deficiency in writing? With some lenders like BofA you already know they will not release you from the deficiency, if you do a short sale. So why not put pressure on them before you walk right into the trap they set for Realtors and their unfortunate clients.

9. Ask your Realtor to produce the California Association of Realtors short sale listing addendum. Have him or her read it to you and then ask if them if they agree with the admonitions and why? and

10. If you are considering listing your property as a short sale and one of the Realtors you are considering claims to get releases of deficiency on all his or her short sales... my advice is to run for the hills. Based on my experience, working on close to one hundred short sales, and reviewing some of the approvals those Realtors claim to be full releases.... those Realtors are either lying, inexperienced or clueless. Why risk your financial future?

11. If you have not yet listed your property in Southern California and you are thinking about working with a Realtor who claims to always get the seller released from the deficiency. We suggest you ask to see the releases for that Realtors five most recent sales. I will review those releases with you for free.

Why is the wording in those approvals so important?

Just recently the New York times and Realtor.com magazine put out articles saying lenders are starting to sue sellers for the deficiencies after short sales. Note, a release of mortgage, a release of lien, a chargeoff, or a report to the credit bureau as settled is not the same as a written release of liablity for the loan.

June 2009 update. On July 1st 2009, the new foreclosure consultant act goes into effect. Once a homeowner receives a Notice of Default Realtors will no longer be able to negotiate with the lender. For more information on this ask you Realtor to provide with the California Association of Realtors guide for short sales. And its guide on the foreclosures consultants.

Note: if you are planning on a short sale and you have two loans, we suggest you may not want to go into default on your first loan until you commence negotiations with your second. (ask us about our short payoff strategy.)    However, if you are going to do a loan modification you may find it beneficial to be in default on the first in some instances but not in others.

Fannie Mae says that the servicer (lender) will be planning to seek repayment of the short fall unless the payoff statement says "full and final settlement of the debt" or similar language. (Don't be fooled by language solely releasing the lien or "mortgage".) Don't leave your financial future, your assets or your salary in the hands of newly minted short sale amateurs. The founder of this website has been negotiating real estate and loan contracts as a lawyer since 1991.

Many seconds are now completely wiped out; Yet many, if not most, short sales are not closing because the second lien holders are demanding a great deal of money to release their liens. Why? Because lenders like Bank of America go after the seller for most, if not all, of the loan. Do not risk your assets, perhaps 25% of your salary and your future by starting the short sale process until you know how to protect yourself from sold out juniors.

We can suggest multiple strategies which can work. But, the best strategies must be deployed before you start the short sale process. To learn more, just fill out our Upside down analysis.

Before you agree to do the short sale, make sure you get a legal opinion in writing that you are being released, by the lenders, from the underlying loan obligations.  The loan forgiveness legislation passed in Decemeber 2007 did not release you from the deficiency balances on the loans, nor did it relieve you from paying taxes to the state of California.

Protect yourself and place a lawyer on your team. Use the law to your advantage.

To find out more about short sales, deed in lieu, foreclosure, and more;

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Short sales, loan modifications and pre-foreclosure workouts or

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Note we are not anti Realtor we believe Realtors should do what they do best, which is to help buy sell and market real estate and lawyers should be doing the legal work.

John McConnin, Esq.
Attorney at Law and Realtor

McConnin & Company Realty
San Diego California

john@favoriterealestate.com
800.608.8311

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