Short Sale Myths I hear from California Sellers looking for a Short Sale Realtor
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1. "You can't do a deed in lieu if you have 2 loans". Completely wrong. What is the difference to the second lien holder if it is already wiped out. The second gets money from the first whether from a short sale or from a deed in lieu. However, sometimes a lawyer can negotiate a short payoff with the second before the property ever even gets put up for sale or considered for a deed in lieu. If you hear a Realtor tell you, you can't do a deed in lieu with two loans. Laugh and find a new advisor.
2. "Our in house lawyer will take care of it". I have seen the contracts drawn up by in house lawyers. They are very protective of the brokerage. Ask to speak with lawyer before you sign a listing agreement and ask the lawyer to send you a retainer agreement detailing what he will do for you. An in house lawyer is not your lawyer. You need a retainer agreement.
3. The deficiency is taken care of in escrow. Wrong, run for the hills. I heard a realtor say this a few weeks before he made a very expensive mistake. It is not taken care of in escrow and Realors are not licensed or trained to review or negotation the releases and the contracts. I have no idea how the heck Realtors are telling people to enter into agreements they are not licensed to review. (That, to me, is instant liablity.) If you realtor is telling you to sign agreements or escrow instructions have him or her do so in writing. (you will not regret it.)
4. You must be in default or not paying on your loans before you can do a short sale. Wrong. And will probably get thousands of Realtors sued. This is the worst advise there is for people who have refinanced their loans. I have alrady seen Realtors costs people 10s if not hundreds of thousands of dollars with this advice.
5. Short sales equals release from a deficiency. Wrong. In a short sale involves liens, notes and escrow. This is not something Realtors are licensed to handle or negotiate. You need to have an attorney determine if you are going to be released from fancial liablity. In our experience most lenders attempt to keep the seller on the hook for financial liablity. If you Realtor tells you to close the deal or sign paperwork make sure you get him or her to put that advice in writing.
6. You should turn over your financial information to the lenders loss mitigation departmnent. Maybe.
7. Short Sales are better for you than a deed in lieu. Sometimes. If you have purchase money loans you may not want to risk tax liablity to the state of California.
8. Investors can do short sales with Countrywide. Maybe not anymore. But you can do a deed a lieu.
More later.
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Last Updated ( Sunday, 25 May 2008 )
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