San Diego Short Sales

What about Bob?

Bob Wilson has been representing buyers and sellers with San Diego County real estate since 1990.

Bob has extensive experience with distressed properties, having negotiated dozens of San Diego short sales in San Diego County. Read Bob's comprehensive overview on Short Sales, Mortgage Debt Forgiveness and Tax Relief.

With our dominating Internet presence, coupled with our team of buyer specialists, we cover all of San Diego County and represent buyers and sellers in just about every zip code and in all price ranges.

The current San Diego County real estate market is dominated by distressed properties - bank owned properties and short sales, where the seller owes more than than the property is worth. As a buyer, both of the these types of transactions require that you know what you are getting into; the upside attributes and the downside risks.

San Diego Short Sale Transactions

The short sale seller, in particular, needs to fully understand all of the options available and the potential consequences that are applicable to each option. No two short sale transactions are alike, therefore the typical boilerplate approach most agents take with regard to representing the short sale listing is a primary reason why the majority of short sale transactions fail to close.

If you are in the unfortunate position of having to consider a short sale with your Southern California real estate, call me before you list your property and I'll walk you through the process. It is crucial that you understand what is involved PRIOR to signing ANY listing agreement and seek legal and/or tax advice first. I will give you an outline from which to start your discussion with the appropriate legal or tax professional. If you are in Southern California, I recommend San Diego real estate attorney Lincoln Quintana.

For a confidential consultation, I can be reached at 858-382-5820 or you may contact me via email at bobwilson@gmail.com.

Sometimes the worse thing for seller in a short sale is an...

... approval!

Say what???

The approval you waited months to obtain may be a bad thing?

In California,it may not be, and likely isn't, the full release from financial liability that you think or have been told that it is.

Here is a sample of a boilerplate Countrywide approval that many agents proudly display on their websites as proof of a succesful short sale. Can you find the underlying risk?

_______________________________________________________________________________________________

If this short sale is contingent upon Countrywide and/or its investors receiving a promissory note, we will reserve the right to collect the full amount on the new promissory note which may lead to us pursuing a deficiency on that balance should the need arise. If the short sale does not close, then we will pursue all remedies under our note and mortgage.

The conditions of the approval are as follows:

1. Closing must take place no later than or this approval is void.
2. The approved buyer(s) is/are the sales price for the property is
3. Another buyer cannot be substituted without the prior written approval of Countrywide.
4. Closing costs including realtor commission is not to exceed $ . This figure includes the payoff in the amount of $3,000.00 to the 2^nd lien.
5. Proceeds to Countrywide to be no less than $3,000.00
6. The property is being sold in “AS IS” condition. No repairs will be made or be paid out of the proceeds, unless specifically stated otherwise.
7. Seller is to contribute $0.00, to assist in the closing of this transaction. This contribution will be in the form of:

PROMISSORY NOTE (Signed and returned prior to closing): $0.00

CERTIFIED FUNDS CONTRIBUTION (Due before closing): $0.00

If a promissory note is required, it must be signed and returned to Countrywide prior to the close of escrow. It is the responsibility of the closing agent to ensure that the promissory note is signed and returned to Countrywide.

If a promissory note has already been signed and agreed to between the seller, investor and the Mortgage Insurance Company, a signed certified copy must be provided to Countrywide prior to the close of the short sale transaction. It is the responsibility of the closing agent to ensure that Countrywide receives the copy.

*** Sales proceeds will be returned if the note has not been received. This will result in a delay of the transaction and/or possible cancellation of this short sale transaction. ***

1. The sellers will not receive any proceeds from this short sale transaction. If there are any remaining escrow funds or refunds, it will not be returned to the seller; it will be sent to Countrywide to offset the loss.
2. The property must be free and clear of liens and encumbrances other than those recognized and accounted for in the HUD-1 approval, on which this approval is based.
3. Countrywide does not charge the borrower for statement, demand, recording, and reconveyance fees on short payoff transactions. Do not include them in your settlement statement. Countrywide prepares and records its own reconveyances.
4. Other: All funds must be wired. Any other form of payment of funds will be returned. Payoff funds must be received within 48 business hours of the HUD-1 settlement date.
5. Other: Should the closing be delayed and the Investor/Insurer agree to an extension of the original closing date, the Borrower(s)/Seller(s) will be responsible for any per diem fees through the new date(s) of closing, extension fees and foreclosure sale postponement fees. The Borrower(s)/Seller(s) will be responsible for any additional costs or fees over the stated approved amounts.
6. Realtor’s commission, paid from proceeds, not to exceed $

If the seller is entitled to receive any proceeds based on a claim for damage to the property under any policy of insurance, including homeowner's, lender-placed, casualty, fire, flood, etc., or if seller is entitled to receive other miscellaneous proceeds, as that term is defined in the deed of trust/mortgage (which could include Community Development Block Grant Program (CDBG) funds), these proceeds must be disclosed before we will consider the request for short sale. If we receive a check for insurance or miscellaneous proceeds that were not previously disclosed, Countrywide will have the right to keep the proceeds and apply them to Countrywide’s loss after the short sale. We similarly would have the right to claim the proceeds to offset our losses if it were not previously disclosed and it was sent directly to the borrower.

Possible short sale? Know your options... and the potential cons

In the above boilerplate approval now used by Countrywide/ Bank of America and several other lenders, there are some assumptions made or suggested by many agents and brokers doing short sales in California.

The primary, and most dangerous assumption, is that there is no risk of a deficiency if the loans securing real property in California are purchase money.

One lender, Bank of America, is now as a matter of policy, not stating in writing that they WILL NOT seek a deficiency or that the short sale is to be considered as having settled the loan in full for less than owed. Even in situations where the debt is prurchase money, Bank of America is taking the position that the section of California code that states that purchase money loans trhat are foreclosed on are not subject to a deficiency doers not apply via statute to a short sale.

Short Sales & the State of California Franchise Tax Board

Yes Virginia, there is a tax collector who wants their pound of flesh in the form of state income tax on your forgiven debt, if you are able to get the lender to forgive the debt and not seek a deficiency. Contrary to the advice of many agents, the Federal law that governs taxation on forgiven debt DOES NOT Apply to California. The State briefly brought the state tax code into compliance with the Feds in 2008, but they conveniently allowed it to expire at the stroke of midnight on New Years, 2009.

The Moral To The Story:

Regardless of what any agent or broker tells you, prior to listing your property for sale as a short sale, PLEASE obtain qualified legal and tax advice. It is imperative that you know ALL of your options and ALL of the potential consequences.

If you need referrals to tax and legal professionals, let me know. For a confidential consultation, I can be reached at 858-382-5820 or you may contact me via email at bobwilson@gmail.com.

Best regards,

Bob Wilson