First Centennial Title Company of Nevada has put together a Homeowner’s Guide to Short Sales. This guide contains useful information for homeowners considering selling their property as a short sale. From a detailed explanation of the short sale process to defining the terms homeowners may encounter, this comprehensive guide also contains tips for writing a hardship letter as well as sample letters.
If you are a homeowner contemplating selling a property as a short sale read through this guide and then give me a call if you have further questions.
– Guy
(775) 722-4011
sleezy
short sale sellers should also learn about the HAMP and HAFA programs that are available..
Guy Johnson
sleezy,
I agree. And these programs are mentioned in the guide as options for homeowners.
sleezy
guy
when making an all cash offer on a short sale (with proof of funds) is it that important to write an earnest money check?
Guy Johnson
With short sales I usually send only a photocopy of the EM check to the listing agent, who then forwards to the underlying lien holder.
We do not deposit the EM check with the escrow officer until *after* we have received written bank approval of the short sale.
sleezy
Thanks guy!
I just figured that an EM check wasn’t needed in the event of a cash offer. I could see if the buyer had a contingency, or they were attempting to get a loan.
I only ask because my (EX) realtor told me I had to write an earnest money check for $1,000. I made the mistake of just assuming that it was mandatory. however, soon after I found out the EM check could have been for whatever amount I wanted.
so then you are saying that even if it’s a cash offer you should still give an EM check?
thanks guy appreciate your knowledge
Guy Johnson
sleezy,
Earnest money, as part of an Offer for purchase, is not mandatory, but it is customary…even if the offer is all cash.
The EM amount is variable, and usually is proportionate to the Offer amount. I’ve heard that the EM amount used to be equivalent to 1% of the purchase price. However, nothing is standard these days.
Keep in mind that all terms of an Offer are negotiable. If the Seller takes issue with the amount of the earnest money (or lack thereof) specified in your Offer, he/she may respond with a Counter Offer that increases your EM deposit.
smarten
Guy –
Don’t mean to be picky but in order to be enforceable ALL offers, once accepted, require some consideration. When it comes to the sale of real estate, typically that consideration is cash [although it doesn’t necessarily have to be].
Jeffrey Dow Jones
Hey Guy,
Short sales are a lot more complicated than a lot of people understand. It isn’t just as easy as selling your house for less than it’s worth. My industry spends a lot of time talking about the simplified macro perspective of “strategic defaulters” and how that impacts the financial system as a whole, but there are many more dimensions to that problem at the microeconomic level. It isn’t just about a bunch of banks taking losses on their loan book.
Nevada’s a recourse state — have you seen any local evidence (either quantitative or anecdotal) about lenders seeking to recoup losses from the borrowers in these short sales? I’m curious about how aggressive these banks are on that and what effects that may have on consumer behavior.
Nice work with the blog…
Guy Johnson
Yes, smarten, you are correct. …part of the definition of a contract – “consideration from both sides”. So, to be technically correct, I suppose a prospective Buyer could offer $1 in earnest money. Again, such an Offer would likely be countered by the Seller.
Jeffrey Down Jones, Thank you for your comment and compliment. In answer to your question, I have not yet seen *primary* lien holders attempting to recoup their “losses” on approved short sales. However, who knows what the future may hold.
GratefulD_420
Short Sellers will be pursued by the banks. Anyone who thinks differently is not being honest with themselves. The banks are doing what they can right now to keep velocity…. getting the highest bidder into a house to pay the mortgage ASAP. They don’t want to rock the boat or stop the caurosel by calling short-sellers in on their defaults. Not yet anyways.
Once they reach a point of security on current defaulting loan owners… then they will focus on recouping their losses… also doesn’t hurt that these people have now had some time to get their feet back under themselves.
If the bank doesn’t go after them… you don’t think they will sell the rights off to a collector for dimes on the dollar? Why not? Name one good reason? Of course they will.
If a bank has a right to collect a debt… then the manager is being neglegent of his duties not to collect.
Maybe the feds will step in to save the short-sellers….. but truly that will be their only hope of not having wages garnished by some collector for the next 15 years… where you get nothing…becuase of a short-sale that seemed like the right thing to do in 2009 !
Jay
About a month ago, on the tv show “Face the State”, they talked about the two types of Short Sales in NV, one in which the banks can go after the sellers for “only” 6 months, and the other, where they can pursue the sellers for 6 years. I cannot remember the name of the show’s guest or the financial institution he worked for.
GratefulD_420
Jay – I’m no expert or lawyer. But I believe in a foreclosure they can pursue for “only” six months. It’s all types of short sales where they can initiate recourse anytime within six years, unless specifically stated otherwise in the short document.
I do wonder if this is why Banks have begun to gear heavily towards Short Sales over the last year?
smarten
GratefulD states “the banks are doing what they can right now to keep velocity…. getting the highest bidder into a house to pay the mortgage ASAP. They don’t want to rock the boat or stop the caurosel by calling short-sellers in on their defaults. Not yet anyways.”
I have to disagree. As real world evidence:
Short sale seller has three mortgages against his CA. former primary residence [meaning the holders of the first and second mortgagees can’t go after him for a deficiency given the loans were purchase money]. I control the third mortgage [no, it’s not mine]. Seller defaults on all his mortgages and puts his property up for sale. An offer is submitted and the holder of the first [Chase] attempts to dictate what the other two junior lienholders will get from the sale proceeds [in my case, zero because Chase has a policy of allowing third and greater mortgagees to receive nothing]. My response is no ticky, no laundry – foreclose unless I’m paid $5K. Chase comes back and agrees. But then the sale falls apart when the buyer can’t get a mortgage.
House goes back on the market and three months later another offer is made for less than the first. But this one is all cash/close in 30 days. Again Chase attempts to dictate what junior lienholders can receive – this time in my case, $3,200. I stipulate the same $5K [I am required to submit a short sale letter which outlines my terms/conditions] and Chase counters at $2,100. My response is then $10,000 and if you don’t like it, foreclose [because the third deed of trust is secured by multiple properties so it’s not like I will get wiped out by a foreclosure].
I think Chase is going to nix the deal and foreclose. And when all is said and done, title will revert to Chase; it will be in a bigger hole than the one it’s already in; after costs of sale it will realize even less than what it can realize now; and over what; a couple of thousand dollars?
Actually, I hope Chase [is reading this blog and]comes back with a change of heart because if it does, my price tag will go up to $20,000. And if Chase doesn’t like it, foreclose. But I don’t think that will happen because Chase really, really isn’t interested in getting whatever it can now.
Actually, it’s kind of neat turning the tables on an institutional lender because without my consent, there can be no short sale.
Reno Ignoramus
Guy,
A couple of years ago, or more, you surveyed all the listings on the MLS to determine how many of them were vacant. It was a quite high number if I recall, around 50%. The conclusion was that all those houses were either flips gone bad or houses vacated by sellers who closed escrow on the new house before they sold the former one.
I am wondering if you could check now for the vacancy factor. We are probably past the point where the market is saturated with falied flips, as most of those have likely gone back to the bank by now. Also, with so few sales now being in the “move-up” price ranges, it is unlikely there are many sellers who have moved up leaving the former house unsold and vacant. Knowing what percentage of current listings are vacant might give us some insight into the current state of affairs.
Thanks,
RI
Guy Johnson
Hi RI,
The current 4,190 Active listings on our MLS (area #100) break out as follows:
2,145 [51%] owner occupied
1,522 [36%] vacant
471 [11%] tenant occupied
52 [1%] under construction
– Guy
billddrummer
To GratefulID_420,
You are correct that a lender has 6 months after a foreclosure action to pursue for a deficiency judgment.
But the limitation only extends to mortgages on owner occupied residential property.
It’s also true that in a short sale, a lender can pursue a deficiency for up to 6 years after closing, unless the lender agrees to a deficiency waiver.
Most people would rather just get out from underneath an onerous mortgage than try to obtain a deficiency waiver from the lender. As an anecdote, I haven’t heard of anyone being pursued for a deficiency on a short sale. But that doesn’t mean it can’t take place.
The lesson here is to seek competent counsel before jumping into anything.
I now wish I had done just that.
Reno Ignoramus
Thanks Guy for the info. Your efforts are always appreciated. Interesting that the percentage of combined vacant/rented listings today are not much different than they were more than two years ago.
To Grateful and billd:
What you say is correct as to all deeds of trust prior to 10/01/09. After 10/01/09, Nevada now has an anti-deficiency statute with respect to purchase money loans made by financial institutions on SFRs that have been occupied as the primary residence by the borrower.
See NRS 40.455 (3).
Sleezy
Nice to know that those who were irresponsible get even more help from Obama….
Sleezy
Maybe everyone going through a short sale should also get a free car, years worht of gas, and a loaded Costco card… These people really need it!
GratefulD_420
Fairly good article related to this subject in the RGJ today.
http://www.rgj.com/article/20100629/BIZ/6270377/1321/news/Short-sellers-beware
I think stories like this will change the game from Short Sale back to foreclosure.