Short Sales | Love's Real Stories

May 15, 2014

The Czar

I could have saved us all millions of dollars if I had been appointed the Real Estate Czar of the United States, if only there really was such a position as the Real Estate Czar of the United States (RECUS).

If I were RECUS, I would be in charge of all the banks and I would compel them to handle their foreclosures and short sales the right way, instead of their way, which is inept and idiotic, and causes people to shake their heads, pull their hair out, and blow their tops.

The President of the United States (POTUS) should have appointed me RECUS when it was needed the most, back in 2006 when the housing bubble burst and the Great Recession was on the horizon.

My first act as RECUS would have been to notify every bank that I am in charge of all sales; that I have direct access to POTUS and therefore, all bank bailout funds. Then I would have issued the following directive:

“RECUS’ New Short Sale and Foreclosure Rules”

Banks may no longer refuse a short sale for no good reason. If in RECUS’s opinion, the seller has a legitimate hardship necessitating a short sale, and the price offered by the buyer is Fair Market Value, the bank must approve the sale.
For every short sale refusal for no good reason, RECUS will direct POTUS to subtract $10,000,000 from the bank’s bailout money (BOM).

Banks may no longer demand 40 pounds of paperwork to be submitted “for the bank’s sole perusal in settling the aforementioned sale” and then claim “non-receipt of the aforementioned documentation”.
For every pound of paper required by the bank over one single pound, RECUS will direct POTUS to subtract $10,000,000 from the bank’s BOM.
Additionally, the bank will be charged $1,000,000 for every use of the word “aforementioned” more than once.

Banks may no longer refuse a short sale, then foreclose on the property, and subsequently sell the property for less than the short sale price the bank had in hand in the first place. For every dollar less than the original offered price the bank accepts, RECUS will direct POTUS to subtract $10,000,000 from the bank’s BOM.
Additionally, if the property deteriorates during the bank’s ownership after foreclosing, $10,000,000 will be subtracted from the bank’s BOM for every dollar needed to bring the property back to the same condition in which the bank received it.

Actually, I wouldn’t have saved us millions; make that billions.

Leave a comment

May 2, 2014

Real Short

“People have been going through hard times and I feel kind of guilty that we lucked out,” said Jena Scott. “The house we bought just a year and a half ago for $180,000 is now worth $260,000. Our Realtor says he hasn’t seen anyone else come out so far ahead so quickly.”

Jena shrugged her shoulders. “We just got so lucky,” she said.

It wasn’t all luck. Ron and Linda Jameson, the sellers of the house, were going through hard times. “I was down so long it looked like up to me,” said Ron Jameson. Ron is a building contractor and was hit hard by the economic crash.

“We bought when the market was swinging and my business was rolling, he said. “I put a bunch of remodel work into that house right outta the chute, but everything dumped right after,” he said.

Ron and Linda were selling via a short sale and would receive nothing from the sale, no matter who bought it or how much they paid. So, they could choose their buyer. They chose Jena and Jack.

“We chose the Scotts because we liked them,” said Linda. “We passed up an all-cash buyer who would have been more of a slam-dunk, but we wanted to give the Scotts a chance though they were first-time buyers with the possibility of loan difficulties.”

As it turned out, there was loan difficulty. The appraiser for the Scott’s lender turned in a low appraisal, $20,000 less than the sales price. The appraiser wouldn’t give value to Ron’s unfinished remodel work.

“It was all good work,” said Ron, “but I ran out of money and time before I reached the finish line.”

A low appraisal, especially $20,000 low, is typically a death blow to a sale. Banks won’t usually approve a short sale at that kind of discount. Cash buyers were on the sidelines waiting to jump in when this sale died, but the bank ignored common sense and didn’t look at any other offers.

“Through some kind of glitch in the red-tape process, the short sale was approved. Real short,” said Jack Scott.

The Jamesons were okay with it because they got nothing anyway. “We were just glad to have our loan debt forgiven,” said Linda Jameson.

“We bought way below value,” said Jena Scott, shrugging her shoulders. I’m so glad the Jamesons were our sellers.

That’s lucky.

Leave a comment

June 12, 2013

Pork

California politicians agreed to pass a bill, which created a new law. The law took sellers of short-sales off the hook for taxes on the debt forgiven by their bank. The law was easy to pass, because sellers of short-sales are already selling their home for less than their loan amount, and they make no money on the sale, so there is nothing to tax, except “forgiven debt.”

Before the new law passed, sellers of short-sales were taxed for such “forgiven debt.”

That was a couple of years ago. Now it’s time to pass a bill to extend that law because it’s expiring. The bill is a piece of cake to pass, because the politicians can swallow its ingredients easily. But one of the politicians threw some pork into the mix at the last minute, and the other politicians gagged.

“Pork” in the language of politics refers to a politician stuffing a bill to get tax money for a pet project. In this case, the project is the California Homes and Jobs Act, which has nothing to do with short-sales, but was nevertheless stuffed into the short-sale bill.

The California Homes and Jobs Act would be funded by a new $75.00 tax for recording real estate documents not related to sales, but all others, like trusts, quitclaims, and refinancing documents.

The politicians swallowed hard, and passed the bill to extend the short-sale law, including the pork.

The California Association of Realtors (C.A.R.) is snorting-mad the politicians swallowed the pork. C.A.R. supports the short-sale tax-forgiveness bill, but not the new tax.

“C.A.R. is an aggressive advocate for affordable housing,” said a spokesperson,” but believes it is bad policy to fund affordable housing at the expense of home/property owners who need to record real estate documents. The amendment (the pork) attempts to extort support for the California Homes and Jobs Act.”

The California Homes and Jobs Act supporters say this: “More than 130,000 people are homeless on any given night in California. Every day, families, veterans, people with disabilities and seniors struggle to maintain a roof over their heads. California desperately needs a permanent, ongoing source of funding dedicated to affordable housing development!”

Apparently, the question as to whether the politicians swallowed good pork or bad pork is a matter of taste.

Leave a comment

May 20, 2013

Restraining Order

Anita Neston needs a restraining order against her ex. Her ex-bank, that is. Anita and her bank parted ways last year, due to irreconcilable differences, resulting in a short sale of Anita’s house. The bank had displayed odd and sometimes abusive behavior during their relationship, but new stalking and harassment tactics began after their relationship officially terminated when the short sale closed. “The bank won’t leave me alone,” said Anita, “and nobody will help me. I’ve called everyone. I’m going absolutely crazy!”

Anita’s relationship with the bank began when she and her husband, Greg, built a new home in the Sierra Nevada foothills. The bank offered abundant money and favorable terms for financing. The home was beautiful- a little bigger than they originally envisioned- but the loan payment was right where they wanted it. Five years after the Nestons moved into their new home, they separated, and Anita couldn’t afford the payment on her own. Unfortunately, the real estate market had nose-dived, and the value of her home had dropped below the loan amount.

The bank began processing a loan modification, assuring Anita she would be approved, then changed gears and said her only option was a short sale. “The right hand didn’t know what the left hand was doing,” said Anita. “I filled out paperwork after paperwork for both a loan modification and a short sale.” Eventually, the short sale went through, and closed last December.

Then the harassment began. The bank began sending a relentless barrage of letters and packages to Anita at her old and new addresses, all to do with applying for a loan modification. “This is after I sold the house and moved!” says Anita. She gets phone calls demanding her to pick up packages and complete and return required documents. “The packages just keep coming; big fat things with lots of applications and forms. People tell me to just throw them away and ignore them,” she says, “but I get calls, too, one at 7:30 this morning for instance.”

Anita says the State Attorney General’s office told her the bank gets incentives for offering loan modifications. “So they’re sending all these packages to dead-ends. My Fed-Ex driver told me she delivers hundreds of these same packages all over the place,” said Anita. “She knows they are useless, but it’s her job to deliver.”

“It’s a waste of resources and wrong,” said Anita. “I wish others would speak up; maybe together we could do something about this!”

Anyone?

Leave a comment

January 3, 2013

Forgive and Forget

The Real Estate world dodged a bullet when the “Fiscal Cliff” fiasco finally wrapped up, extending the Mortgage Forgiveness Debt Relief Act, but damage was done nonetheless.

The Mortgage Forgiveness Debt Relief Act expired the last day of last year, and the assurance of its renewal and extension- a footnote in the Congressional negotiations- was an unknown. That unknown made a lot of people nervous. Sellers of short sales weren’t sure if they would be able to walk away debt-free or not, so some sellers cancelled their sales when the expiration date of the Act loomed near.

Deciding to cancel a short sale is no small decision to make, for two reasons: One- when a short sale is cancelled, the mountain of paperwork required by the bank is generally tossed out, and the laborious process must begin anew. Two- when the short sale is cancelled, the bank might go ahead and foreclose, leaving the seller and the buyer out in the cold.

Jake and Cindy Blackeren made the call to cancel their short sale on Christmas Eve. “We blew it,” said Jake. “Now we’ll probably lose the place in foreclosure. The bank is playing hardball. The short sale negotiator we were working with won’t take our calls, and the foreclosure department is moving ahead.” The Blackerens have another buyer, and their realtor has sent the contract to the bank, but to no avail. “They told our realtor the short sale negotiator sent our package to the foreclosure side,” said Cindy. “If we’re foreclosed on, our credit is worse, and it will be longer before we can qualify to buy again.”

The Mortgage Forgiveness Debt Relief Act has been extended one more year- through the end of 2013. The Act was created to cancel any taxes a homeseller would owe on the amount of the loan forgiven by the bank in a short sale. Without the Act, federal law counts forgiven debt as income, taxed accordingly.

“We simply couldn’t afford to take the chance of facing a tax hit this year. We’re struggling to keep up with our bills as it is,” said Cindy.

Short sale sellers are back in the saddle for now. It’s a rough ride, though, and watch out for those cliffs.

Leave a comment

Category: Short Sales