Find out about Real Estate on the Monterey Peninsula

Several new laws are coming into effect in 2009 that affect short sales transaction. Agents need to help their clients by knowing the rules and using contract language to protect them. Failure to do so could even lead to an Agent having their license suspended or revoked!

S.B. 1737 says the Dept of Real Estate can discipline by suspending or revoking a licensee for generating an inaccurate  Broker Price Opinion in order to acquire a financial or business advantage, such as obtaining a listing agreement or manipulating a lender in the short sale process.

H.R. 1424 says that the tax exemption for debt forgiveness on home loans under the Mortgage Forgiveness Debt Relief Act of 2007 has been extended to December 31, 2012. It was set to expire on December 31, 2009. This act means that the reduction in mortgage payoff is not income taxable to the seller. Howver, it may cause an increase in gain on the sale resulting in Capital Gains Tax. Sellers are encouraged to talk with their CPA to understand the tax implications of a short sale.

Agents listing a short sale must make use of the "Short Sale Addendum" and the listing agent should put in writing "Seller to obtain written statement from lender (or lenders plural) that lender shall waive and hold Seller harmless for the amount of reduction in Seller’s payoff of lender’s note."

It is imperative that the Seller receive a written statement that the reduction amount of the debt on the Note is forgiven as set forth above. Without this written statement from the Lender, the Seller could continue to be liable for the portion of the Note that is not paid off from the sale proceeds.