SHORT SALE Considerations…


I will first give you a simple definition of a SHORT SALE. The simplest description would be: “You owe more on your home, than what it is worth.” In other words, you owe $300,000 on your home, however it is only worth $175,000. This example you owe $125,000 more than what it is worth. You are SHORT ($125,000) on your payoff. So, you would need a SHORT SALE to sell your home.

First, you must determine if you are even possibly eligible for a SHORT SALE? Let’s begin with the bad news. Just because you owe more than what your home is worth (referred to as “Upside down”) it is not a reason for a SHORT SALE; the loss of value or equity is not considered a “hardship” (a reason for a Short Sale).

Hardship – No Hardship

Lenders may consider a SHORT SALE for homeowners who have experienced any of the following:

  • Job Loss
  • Business Failure
  • Illness and Medical Costs
  • Divorce or Death of a Spouse
  • Natural Disaster

If the Homeowner/Seller has liquid assets, they may have to contribute to the deficiency.

Some wonder if a Real Estate License Required to Represent the Parties to a Short

Sale?

The simple answer is YES, with some extremely narrow and limited exceptions and exemptions.

A real estate broker license (or a real estate salesperson license where that person is working under the supervision of his or her broker) is required under section 10131 (d) of the California Business and Professions Code (B&P Code) where a person, in a representative capacity on behalf of another, “negotiates loans…or performs services for borrowers or lenders …in connection with loans secured directly or collaterally by liens on real property…” for or in expectation of compensation, “regardless of the form or time of payment”.

In addition, under section 10131 (a) of the B&P Code, a real estate broker license (or salesperson license with appropriate supervision by the broker of record) is required of any person who, as a representative of another, “Sells or offers to sell, buys or offers to buy, solicits prospective sellers or purchasers of, solicits or obtains listings of, or negotiates the purchase, sale or exchange of real property…”

Criminal Penalties for Those Who Participate in Unlicensed Activities. Those who engage in short sale transactions, including the related “negotiations”, and who are unlicensed (and do not have the benefit of an exception/exemption), are in violation of California law. The penalties include fines and/or imprisonment under section 10139 of the B&P Code.

Further, if you are considering engaging in short sale transactions, you should fully educate yourself about the mechanics of the process and the related legal and ethical issues, and work only with legitimate professionals.

Finally, if you become aware of information about fraudulent short sale activity, please contact the DRE’s Enforcement section in Sacramento or at the office closest to you, or via the Internet at DRE Complaints. In addition, you may want to contact the California Attorney General’s Office, the U.S. Department of Housing and Urban Development, and the Federal Bureau of Investigation.

You Can E-Mail Me Any Real Estate Question, I Am Always Willing To Answer Or Help With Your Questions, Problems Or Concerns.

larry@robertsonrealtor.com or Call: 909.983.2892

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