Replies to This Discussion

Permalink Reply by Mori Langshaw Sr on January 5, 2010 at 8:27am

Hi Shelly. There is your answer. The fact that the sellers will foreclose before they agree to a judgement. Tell the bank that as the bank won't want to foreclose.

Just write it in a way that shows how the bank wins.

Permalink Reply by Jennifer Klein on January 6, 2010 at 5:30am

Ask! Go back and ask for a settlement letter with that language in it. As a matter of fact, write it on the letter and send it back to your negotiator. If that negotiator doesn't like the language you've suggested, ask them how they would suggest to write it? If that doesn't work take it to management. In some ways if the letters don't state "paid in full" or "settlement arrangement" your investors can suffer over long term. If they are not insolvent deficiency judgments can be pursued outside of foreclosure anyway. Of course all of this is relative to the seller's situation, I am not a tax attorney nor do I know the ins and outs of this seller's finances, but investors situation on Short Sales can be tricky so encourage them to seek out their tax experts advice, because even a settlement could be detrimental if not written correctly.

Permalink Reply by Shelly Long on January 6, 2010 at 5:43am

Thanks Mori & Jennifer! I sent an email through Equator yesterday to the Team Leader (because the Negotiator doesn't respond to my emails!) following Mori's suggestion. I'll let you know what they say. So far, no answer. Hmmmm.....

Permalink Reply by Shelly Long on February 4, 2010 at 2:22pm

Hi All,

A month later and here's our story. We are scheduled to close tomorrow. One loan with BofA. Buyer has signed. Seller went to sign today and refused to sign the short sale letter which acknowledges that the investor (Bank of NY) may issue a deficiency judgement if they choose. So, the title officer calls and asks me what to do. I emailed (through Equator) the closer, nego, team lead, manager, avp, svp, vp and advised them of the situation. In the mean time, the title officer calls her legal dept for assistance. I don't hear anything for a couple hours and then the nego calls me 13 times! I was on another call and couldn't take her call. It was C-R-A-Z-Y!!!! Then she emails me the following:

Thank you for your email. Please note this property is a Non-Owner Occupied/Investment property. The Investor reserves the right to pursue a deficiency if they should choose. Our letter will not be altered/waived/or changed in any way. Please let us know if the seller will not proceed with the approval letter as provided so we may cancel the short sale request. Thank you and have a wonderful day.

Thank you and have a wonderful day??? Huh???

Okay, so then the title officer says her legal dept will allow her to close it if the Seller signs the following:

"I, Mr. Seller, hereby acknowledge receipt and that I have read and reviewed this letter."

We are scheduled to close tomorrow!

HOWEVER, I don't think ANY of us should ever ASSUME we can bail out these Sellers from their debt. BofA had previously told him that the investor reserves the right to pursue a judgement, but he said he saw it on TV that other short sale specialists could get that wiped out. Right?! TV, hmmmm.... And this is an educated man....who is obviously now playing a crappy game of hard ball with his agent who has worked on this $150K condo short sale since February 2009!

Why do we do it? I swear there needs to be a legal document that Sellers need to sign stating that we cannot wipe out their obligations and that they still want to proceed, and that we get PAID NO MATTER WHAT! Anybody have a form like that they can share???

Thanks for listening~!

Permalink Reply by David Dee on February 5, 2010 at 6:51pm

Looks like an issue with BofA. I had a similar situation where BofA stated that they will not remove the wording of the deficiency judgment. They indicated that is their standardized template on approval letters and cannot make any alterations to it. I hear this is contrary to the fact from reading that it is possible to remove but I have not encountered such a case myself.

Shelly, getting "PAID NO MATTER WHAT!" is a great concept. :D If only lenders know the kind of work involved in shortsales maybe changes are imminent? I could be dreaming...

Permalink Reply by Jennifer Garrell on February 16, 2010 at 4:56pm

I have been training and researching for the past few months to prepare myself to assist Sellers in a Short Sale situation. My business is in Southern California. I have been strugguling with the concept of why it is a benefit for a Seller to do a Short Sale, because of the deficientcy judgement laws in California. The California Association of Realtors posted a handy dandy chart on their website to help us understand the "in's and out's" of the deficientcy issues Sellers face. Most foreclosures in our area are non-judicial (I have not seen a judicial foreclosure ever in my 12 years in the business) In the chart from CAR, it indicates (if I'm reading it correctly) IF the property is taken back by the lender via a Trustee Sale (non-judicial foreclosure) there is NO recourse as the lender cannot come back after the owner for any deficentcy judgement- regardless if the Seller had a recourse or non-recourse loan on the property. With that said, if we have a Seller that wants to do a short sale, I have seen the wording on the Short Sale Approval letters that indicate the the lender has the option to collect for the deficentcy, and since the home was not taken back via Trustee Sale-the bank has every right to come after the Seller. Now I know we can go and attempt to negotiate to have the deficentcy wording taken out......but how often does this happen? I really want to make sure I'm not only educating the Sellers properly but I also don't want to waste anyone's time.

What is your take on this? At this point I am not comfortable proceeding with short sales because I'm not getting the BIG picture, lol :-)

Thank you for all of your words of wisdom and assistance.

Jenn

P.S. I can email a copy of the handy dandy chart from CAR if needed. Please email me at [email protected]

Permalink Reply by Kylee Roe on February 17, 2010 at 3:23pm

Jenn,
And everyone....
Sorry to be a reporter of bad news, but want to pass along a portion of what I've learned from Short Sale classes given by our brokerage trainers and legal team. Even if the bank says they won't come after a seller, that bank can still sell the bad debt to bill collectors, who can come in and then try to collect. Just like it happens with bad credit card debt, our managers and legal team fear this may happen with these old short sale loans. So, its' not the bank collecting, but still being collected.

The best thing you can do is supply information regarding the possible consequences of short sales, use a Hold Harmless, and serve your client well.

Like subprime loans, there will be some fallout from short sales.

K

Permalink Reply by David Dee on February 17, 2010 at 6:23pm

I think the deficiency judgment is what's holding many sellers up. It's one of those gray areas so there is no clear answer one way or another. Would like nice to have an 'absoluteness' to it but then again many of the laws are written by attorneys and the answers are usually 'it depends'.... ;D