Posted by: Catherine | June 27, 2011

Short Sales in Contra Costa, then and now . . .


Yes, Short Sales will be here to stay for quite some time.  Almost 5 years ago, I started my first short sale for a friend who had a horrible family tragedy.  They had just bought their first home together, and she just couldn’t fathom all that they worked for was going to foreclose.  But, unfortunately, they bought high – you know, the multiple offers, 10% over list price high – and got a “pick a payment” type loan which would enable them to pay less on months their self employment income was less.  But in the end, without the main income earner anymore, the house foreclosed.  Back then, the banks didn’t even have a system in place for a short sale.

Back then, the house foreclosed for a couple of reasons.  One is attorneys were scared to death of short sales in that market.  I was warned that anything a client told me was not protected by attorney client privilege.  I was told that many “liar loans” were taken out by well meaning people, who just did as their loan broker said and signed off on fraudulent loan applications and documents based on income that didn’t exist.  That wasn’t the case in my friend’s situation, but it was still a concern at that time in the market.

Fast forward to the flood of short sales that started coming across my desk.  Imagine if you did “fib” on your loan application, on your income, and you signed off on documents you knew showed you made more income than you really did?  Back then, the 2 years of tax returns, and all the bank statements and pay stubs requested by the banks quite frankly may have been handing a lender evidence of fraud on a silver platter.  Attorneys still, were unsure of how to handle these deals, except to say FORECLOSE so one didn’t have to give the lender evidence of any fraud.

Now, of course, fraud was not all that was going on.  Some moved to California after being relocated for their jobs, and now were being relocated again, but this time, being completely underwater on their mortgage.  Luckily, for some , some corporations (the big ones) would provide loss of value incentives and pay the difference on the mortgages to avoid them being short.

Some did everything right, but fell into the trap of the attractiveness of the short term adjustable ARMs, minimum payment loans, neg am loans, pick a payment loans… they were the “designer loans” after all and often the people selling them knew little.  The perfect storm….
So where are we today?  Today, in short sales, we see hard working people, who have done everything right.  People who had money down, people who did fully stated, fully documented loans, people who were so happy to finally experience home ownership.  Things change, life changes, jobs are lost, marriages dissolve, families have emergencies, loans adjust, jobs move, families grow, income goes down – any number of things are impacting families today.

Short sales are easier.  Not saying shorter or any more fun.  But most banks have a process, many are online with Equator (Bank of America, Wells Fargo, Nationstar, ASC, BSI Financial Services) which enable us to manage the short sale transaction online.  The government has gotten involved with the introduction of HAMP and HAFA designed to streamline loan modifications and short sales – admittedly though, neither works as well as it should . . . There have been laws passed to protect home sellers.  In California, most notably, SB931, protects borrowers from further recourse after a short sale.  Nationally, the Federal Mortgage Debt Forgiveness program went into effect in 2007 and may protect some borrowers/sellers from tax hits.  The State of California has followed suit for some borrowers.

Some banks are even resorting to MONEY incentives to borrowers to short sale vs a walk away foreclosure.  Chase for instance has been offering “some” borrowers upwards of $30,000 for a successfully closed short sale.  HAFA short sales offers a $3,000 relocation incentive and even FHA / HUD loans offer monetary incentives one can use for relocation or toward the pay off of secondary liens.

Should you do a short sale?  Maybe.  You must always talk with an attorney or CPA about your individual circumstances. Especially if you are looking to short sale an investment property (yes, I’ve done dozens for investors), or have a recourse second loan (home equity line, refinanced second, etc).   Some considerations, some clients are looking at in the question of short sale, or not are:

  1. Can they afford to hang on and pay on time?
  2. If they can afford to stay, what about the future, how long will they stay before they can sell with equity? or break even?
  3. Knowing some of the federal and state protections are temporary, does it make sense to do a short sale now?
  4. Is it ok to short sale when there isn’t a financial hardship?  (Answer: it depends…)
  5. Will they owe taxes on the loss?
  6. Will they be exposed to recourse with a second lender?
  7. Is it better to walk away and foreclose, or short sale?  (Answer: there are pros and cons to both)
  8. What will the emotional toll be of either option?  (many feel embarrassed)
  9. In a short sale, who pays commission?  What about repair work? What are there obligations (I explain all that)
  10. What is their liability in a foreclosure?

There are short sales in every single area of Contra Costa now.  No town, no city is immune.  Of course some cities like Concord, San Ramon, Martinez, Antioch, Pittsburg, Brentwood, etc. have MANY short sales.  Whereas Walnut Creek, Clayton, Pleasant Hill have maybe slightly fewer.   Still fewer are towns like Danville, Alamo, Lafayette, Orinda, etc.  Hit hard were new construction areas, first time buyer areas.

So, if you are contemplating these questions.  If you need an experienced short sale agent to work with you to decide the best route, please call me for a free, confidential consultation.  If you want to save your home, investigate a loan modification or a deed in lieu, I can get you information and resources for those options too.  Need an attorney or CPA referral, I’m happy to provide those.

You can reach me:

Catherine Myers
DRE 01337828
Windermere Bay Area Properties
Walnut Creek, CA

925-683-2125

Contra Costa homes for sale, search homes for sale, short sales

Keep checking back to this short sale blog as I focus exclusively on day to day issues of short sales in our Contra Costa areas.  I have hundreds of satisfied clients, and dozens and dozens of successful short sales.

Remember the following important disclaimer:

I do NOT charge any fee if you decide at any point not to proceed with the short sale, but as noted, you may have a liability to a buyer if you cancel too late in the transaction.  You can always cancel an agreement with me with no penalty or fee.  Neither Windermere Bay Area Properties, nor Catherine Myers, broker associate, are associated with the government or any lender.  See the full MARS disclosure here.


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