As printed in the OC Register / Saddleback Valley News
Written by Jim E. Flynn, Century 21 Beachside Realtors, Lake Mission
Viejo
Aug. 11, 2008
Four Views on Short Sales, Foreclosure Reforms
Q. With the increase in foreclosures and short sales around South Orange County, isn't
there a real danger that investors and bargain buyers won't get these vacant places cleaned
up and back on the market?
- Paul from Rancho Santa Margarita
A. There are now new laws to help this problem with vacant properties and also to help
protect homeowners facing defaults.
In early July, the state Legislature enacted a set of foreclosure reforms to address the
adverse effects of high foreclosure rates in California. These new reforms require owners
acquiring property through foreclosure to maintain the exterior of vacant residential
properties, and the also extended from 30 to 60 days the time for residential tenants to
vacate properties that have been foreclosed upon, unless other laws apply.
The new law requires lenders to contact homeowners to explore options for avoiding
foreclosure at least 30 days before filing a notice of default.
In a previous column I discussed short sales but still get questions, so perhaps a more
thorough review would be helpful.
SHORT SALES
Short sales are the same as the term "short pay." How do they happen? When the
proceeds you get from the sale of your property are not enough to pay off your lender(s) of
record in full. Your lender(s) will review all of the documents for the property - the
purchase agreement, escrow instructions, estimated closing statement, appraisal etc. - and
may agree to accept a pay-off, that is less than the amount owed.
If this happens, you, as the seller, will get zero proceeds. All proceeds then will be
paid to the lender at close of escrow less costs and approved expenses.
So there are really four perspectives: the buyers, the sellers, the lenders and the real
estate agents.
Buyers' perspective
"Equity purchasing" laws must be observed by the buyer. There can be no post
sale accusations of unfair advantage because of any financial hardship. These properties are
normally sold as-is. Buyers need to understand that when choosing their financing. Approvals
are frequently difficult and patience and a "not in any hurry" attitude is
definitely needed.
Sellers' perspective
As indicated from the buyers' perspective, the sellers also must realize that negotiating
a short sale is a difficult, often frustrating process. Issues that may be needed dealt with
are long times waiting for a decision or change, communication with the authorized person
who can really say "yes."
Full disclosure with documentation, and working with everyone involved is what's needed
to get the property sold. It is certainly my recommendation - though not required - to
enlist the services of an experienced licensed Realtor.
Lenders' and Realtors' perspective
The lender can save many costly foreclosure fees and minimize the loses by becoming the
owner of the property and accepting less money now. The Realtor perspective is complete
knowledge, patience and persistence and a thorough understanding about the entire process.
Jim Flynn is a Realtor with Century 21 Beachside Real Estate in Mission Viejo. He has
more than 30 years of home sales experience and belongs to the county, state and national
associations of Realtors.
Original
article in The Register
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