Short Sale Myths we 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 even gets listed as as short sale. If you hear a Realtor tell you, you can't do a deed in lieu with two loans. Laugh and find a new advisor. Having two loans can make a deed in lieu more difficult, but deeds in lieu can stil be accomplished.
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 with your lawyer.
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. Deficiencies are not taken care of in escrow and Realtors are not licensed or trained to review or negotate contracts dealing with lien releases and loan balance releases. While attending Broker license renewal training, we were told that Realtors are not licensed to go over the terms of the escrow contract with their clients. If Realtors are not compentent (licensed) to go over the escrow agreement in a standard sale transaction, how can they even consider reviewing the short sale escrow instructions with a seller? The difference between a solid release and an ambiguous one could cost hundreds of thousands of dollars. Before you let anyone tell you to close. Have someone with mal practice insurance review your transaction.
5. Short sales equals release from a deficiency. Wrong. A short sale involves liens, notes and escrow. You need to have an attorney determine if you are going to be released from financial liablity. In our experience most lenders attempt to keep the seller on the hook for financial liablity. If your Realtor tells you to close the deal or sign paperwork, make sure you get his or her broker to put their 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. Countrywide always releases sellers from a deficiency. Not true, since Countrywide has been taken over by Bank of America they have changed their tactics. We would not go into default on a first loan until we compromised the second lien.
More later.
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Last Updated ( Sunday, 04 January 2009 )
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