It seems like some good news for the poor investors that bought mortgage securities from Fannie May and Freddie Mac. I’m noticing more and more short sales transactions getting approved.
This helps the investors because they don’t have to endure the costly expenses of forcing a foreclosure. Deals that were NOT coming together in past years are moving rapidly through the banking system now.
There are still some communication issues, but they are minor compared to past years.
That should be a pretty obvious statement, but it just seems like people don’t believe in it anymore. The Real Estate industry has taken a beating in the public’s opinion during this whole market downturn. Ethics have come into question, especially the use of “liar’s loans” (stated income and stated assets) and adjustable rate mortgages. You would think we would have learned some lessons and maybe, just MAYBE, we would strive to do things the right way.
Unfortunately, I can still see too many questionable tactics being employed to buy real estate. The latest one that is becoming a problem in my area are buyers being coached to get accepted offers on multiple short sales. The theory being that if you have enough in contract, something will approved by a bank and you can bail out on the other sellers and take the first that goes through.
This is wrong on so many levels, but some agents and buyers don’t seem to care. Why should they worry about a seller getting dumped out of escrow and having their bank foreclose the home? Or all the hard working agents, brokers, lenders and escrow people who thought they had a deal, only to find out they were being lied to and they won’t be getting paid? It certainly doesn’t matter to them that they’ve lowered inventory for other buyers that might actually go through with the purchase.
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.
