This is my new section on ” Deficiency Issues After A Short Sale “. Today is July 18 2011, this is an update, this is a new video, my old section or consultation about deficiency is no longer valid nor relevant. There have been new updates as of July 15thew legislation and law that has been put into place put about short sales and deficiencies.
What does that mean? Let me explain to you what deficiency is, it is the difference between the amount of money your property can sell for and what you owe. So if you owe $500k but we can only sell your property for $400k the remainder of balance would be the deficiency that the bank received. Now prior to last Friday July 15th, banks could come after homeowner in certain circumstances and possibly require them to pay some money in order to do a short sale. Breaking news effective last Friday. Here’s a little bit from the news article, “In a major victory for REALTORS® and consumers, Governor Brown signed into law today and effective IMMEDIATELY a-sponsored bill, Senate Bill 458, amending Civil Code Procedure 580(e) and prohibiting a deficiency after a short sale for one-to-four residential units, regardless of whether the lender is a senior or junior lienholder.” What that means is no matter how many loans you have on the property, whether it be a first a second or a third the banks can no longer come after you after a short sale. Not only that it also says “Effective immediately for transactions closing escrow from this day forward, both senior and junior lienholders cannot require a borrower to owe or pay for a deficiency in a short sale. This law also prohibits any deficiency judgment to be requested or rendered for senior or junior liens after a short sale of one-to-four residential units.” So what this means that not only can the bank not come after a home owner regardless of it’s a first, second or third lien holder after a short sale, they can’t even ask the homeowner to contribute any money in the proves this is a huge victory and huge change in circumstance in regards to how I’ve been doing short sales for the last 7 years. Before I had to always negotiator this and it was always about leverage now the banks has lost all their ability to ask the homeowner to pay any money.
What does this mean for you? This means if you were going to do a short sale and you are upside and cannot afford to make your payments and need to sell your property you can go ahead and do so. You can preserve your credit and not have to pay any money to the banks or myself. You won’t have to worry about them after the fact, doesn’t matter if you pulled out money several times afterwards or what was deemed in the past as a recourse loan, you don’t have to worry about it. Now this doesn’t mean things won’t change in regards to second lien holders asking for more money from the other bank, they are still allowed to ask for money from other resources, such as me a real estate agent and my commission or if they are in a second lien holder position they are allowed to ask for more money from the first lien holder in order for the to allow the short sale. It does state on here that they could ask for the buyer to contribute money, just means that the homeowner will not pay anything. A few things that will exclude from this provision is one if the homeowner commits any fraud or if the homeowner is a corporation, LLC or limited partnership, if the lien is secured by a bond or a public utility liens. But other than that if you are a typical homeowner who owns their property in their own name and if you don’t commit any fraud throughout the short sale process you want have to worry about owing any money back. Again this is a HUGE change for how things were done previously so I wanted to update this section here in my deficiency.
Understand that we are going to still proceed in my particular process with business as usual. We are still going to get an approval letter from the bank and then we are still going to allow you the opportunity to review that with a real estate attorney, so that you can clearly understand what the letter says and clearly understand what these new laws are that are in place and how they protect you. I have to give you this disclosure; I am not a real estate attorney, I cannot site that what these laws are and explain exactly what they mean. I am always going to refer you to a real estate attorney to go over your approval letter this is a service that is free to you, you’re able to utilize your own real estate attorney or one that we work with and again I will pick up the cost for that so that you understand these new laws and exactly how you are protected. I just wanted to update this section of my video; again this is huge new in the short sale world. Hopefully this will contribute to a lot more homeowners going down the path of a short sale instead of a foreclosure and help rebuild this real estate market
Thank You very much for listening to this. This is my presentation on Deficiency Issues After a Short Sale.