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Elizabeth Weintraub
The Seller’s Hardship in a Short Sale
I can often spot a Sacramento buyer’s agent who is new to short sales. They are the guys who start firing off questions the minute they get this short sale agent on the phone. It’s like they are reading from some list of questions to ask a short sale agent, and maybe they are. There is a lot of goofy information online, written by people who are not short sale agents. You can’t blame buyer’s agents for thinking that it’s true because, after all, it’s online, man, it’s on the Internet, it must be true. A smart reader would consider the source before absorbing the data. Sometimes, it’s just an opinion and not fact. And sometimes, it’s a stupid opinion at that.
My absolute favorite question to get from a buyer’s agent is: What is the seller’s hardship? Even if I gave them that information — which I won’t — they wouldn’t know what to do with it. It’s like asking who is the lender; they don’t know what that means, either. They might hear it’s Bank of America and then cringe, because years ago Bank of America had received pretty bad press. However, nowadays, Bank of America short sales are, for the most part, pretty straight forward. So, unless that agent has closed a bunch of short sales herself, she would most likely be clueless about what’s involved or what she could expect to gain from obtaining that knowledge.
It’s none of the buyer’s business what kind of hardship the seller is enduring. That’s personal and private information. Any sensitive information shared by a seller with this Sacramento short sale agent remains confidential. In fact, it’s my fiduciary relationship with the seller that prevents me from disclosing information, apart from ethical reasons. The only thing a buyer or her agent needs to know about my short sales is whether I believe the short sale will close. They don’t get to see the hardship letter.
I’m not disclosing even if there is a hardship in a short sale because not every short sale requires a hardship. Some of my Bank of America Cooperative Short Sales have no hardship whatsoever but they close. If a buyer’s agent wants to know whether a Notice of Default has been filed, the agent can find that information in the property data available online to agents, right alongside the number of loans and identity of the original lenders.
A buyer’s agent is not squeezing the sellers’ personal and confidential information out of this Sacramento short sale agent.
California Short Sale Taxes vs. Personal Liability
A reader from my homebuying website on About.com asked me this morning if he could stop paying on a promissory note after his short sale closed. His short sale agent negotiated, he said, two purchase-money loans in 2010, in which he ended up paying the second lender $5,000, plus he handed over an additional $10,000 promissory note to a credit union. I suspect that the credit union loan was not a purchase-money mortgage because credit unions were not in the business of financing 80 / 20 combo loans. I’m betting that second loan was a hard-money loan. But that’s neither here nor there. The main problem for this guy seems to be that he negotiated a discounted payoff and promised to repay part of it, which he hopes to undo.
This is a pretty good example of short sale confusion. Not only do some people hope that once a law changes or goes into effect that it’s retroactive and can reach back into the past to change agreements or somehow alter things that were legal to do into being against the law — which ain’t gonna happen — but personal liability is often confused with taxation issues. Whether in California a seller has personal liability for a loan after a short sale is a separate issue from whether a seller is liable to pay taxes on that forgiven debt. Mortgage debt relief and whether banks can legally pursue a seller for a deficiency are not the same thing. They are two different things.
But wait, you might say, does this mean a bank might try to collect the balance due on a short sale at the same time the government goes after a seller for taxes on that balance due? Yes, that’s exactly what I am saying. It’s a double whammy.
Fortunately, SB 458, passed in California in July of 2011, added Section E to the California Civil Code 580. It basically says that short of mortgage fraud, in which case it can still pursue, if a seller does a short sale on 1 to 4 units, the bank can’t pursue; can’t go after the seller. But that’s for short sales that closed after July of 2011. It doesn’t matter if the loan was hard money or purchase money, whether the property was owner occupied or a rental, whether the loan was in first, second or third position. Can’t go after the seller. This is a good reason to avoid foreclosure and try to do a short sale. Especially if a seller has a hard-money loan because, legal experts say, foreclosure proceedings do not offer any protection for the seller against a hard-money loan.
But can the seller be taxed on a short sale? On the federal side, for 2013, the mortgage debt relief law has been extended to January 1, 2014. The California law regarding short sale taxes for 2012 has expired. State legislators are working on an extension. This is the part where the law after extension the last time was made retroactive. It took California lawmakers almost a year to pass the extension last go around. We were sweating. But then they made it retroactive. Will they do it again this year? We sure hope so. But this is a classic example of why a seller in Sacramento should get legal and tax advice before doing a short sale. Don’t rely on your Sacramento short sale agent to dispense legal and tax advice because we are not allowed to do it.
Did You Miss the Boat to Buy a Home?
A Sacramento home buyer called yesterday to lament about her attempts to buy a home. She asked me if this was a good time to buy or a bad time to buy. It’s not as simple as that, I’m afraid. It’s a good time to buy if you can conform to the market, and if you can buy a home. That’s because interest rates are low and prices are very affordable. But it’s a lousy time to buy as well because you might not be able to buy a home at all. It’s not like a buyer can make a full price offer and expect that offer to be accepted. Come on, this is not the middle of the Mojave desert — even though that’s how Bay Area investors see us — this is Sacramento.
Sacramento — a severely distressed real estate market that is beginning to rebound. Prices are inches up. Prices are not kissing the sky like Jimi Hendrix. Yet home buyers are making crazy offers like Charlie Sheen on a bender. I can quietly list a home and slip it into MLS and within 24 hours, I’ll have a pile of offers on my desk for $20,000 to $50,000 more than list price. If this isn’t madness, I don’t know what is. If those Charlie Sheen offers were cash, I’d be dancing naked on my desk, but they aren’t. They are financed offers, and if the property won’t appraise to get that loan, they may as well be offering us a cart filled with gold bullion, which we all know will never leave the vaults at the U. S. Mint.
I can’t tell you if this a good time to buy a home. It depends on how much stamina you have and your appetite for rejection. It depends on your type of mortgage, too. It depends on who you are working with, which Sacramento real estate agents you choose to represent you. I can tell you the Elizabeth Weintraub Team is closing deals. I can tell you that some of the largest real estate companies in Sacramento tend to list most of the homes for sale in Sacramento. Some of the real estate companies do not put every listing immediately into MLS. If you are lucky enough to be working with a top producer in Sacramento, you might gain a bit of an edge.
It doesn’t mean that going to the listing agent ensures that buying edge because no reputable listing agent in Sacramento would put her seller at a disadvantage. No way, Jose. We want our sellers to get the highest and best offer; there are no compromises. No favorites. Everyone has an equal chance. But you might get a chance, and that’s the important part.
In this seller’s market in Sacramento, hitching your wagon to a top producer might be the wiser decision.
Do You Want to Live Near the Russians?
By that title, I am not talking about the 49th state admitted to the Union, no, no, no. I’m speaking directly about Sacramento. I’m a Sacramento real estate agent, and I could say that I know where the Russians live, but that would only send the CIA after me, and having the FBI hot on my trail is bad enough. I don’t need one more government agency chasing Elizabeth Weintraub all over Sacramento. No, Sirree. Oh, wait, I didn’t mean to say the FBI, it’s just a California district attorney’s office who wants more information on the bad guys that I sometimes write about.
But the other thing is I do know where the Russians live, but I can’t tell you. If I tell you, I could be accused of breaking the Fair Housing Law. The Russians are a protected class. Put that into your Eisenhower pipe and smoke it. I’m not going to say anything bad about the Russians, either. Some of my favorite people hail from Russia. I’m trying to think of some Russians other than my housekeeper and a REALTOR from Daytona Beach, but that doesn’t mean there aren’t any.
I got to thinking about this because a) many people demand that real estate agents perform acts that would get a real estate agent investigated if the authorities knew or watched the agent do it, and b) people don’t know much about real estate agents, and that which they do know for certain, absolutely certain, is often absurd. Like John Oliver said at the Crest Theatre last night, and I paraphrase, about 50% of Americans are positively devastated and at odds with each other 100% of the time. This is just regular people. This is not real estate agents he’s talking about.
When we got on the elevator after Oliver’s performance to rise to the fourth floor and find our car, I looked around at the people on the elevator. Usually, I don’t like standing in close knit quarters with a bunch of strangers. But these people at least had something in common with me; I mean, they had been to see John Oliver, which means if the elevator suddenly got stuck between the floors, I probably would not mind having to participate in a sudden crisis with this particular group of strangers. It would be better than, say, being in a bus load of Republicans that flew off a cliff while on vacation in Utah.
Call it the LOST syndrome. You know, there you are on a plane flying to some exotic place like, oh, maybe French Polynesia, and the plane suddenly nose dives. Next thing you know, you’re waking up a beach splattered in palm fronds with a bunch of people you wanted to kick while standing in line to board. Do you like these people? Would you rely on these people to strangle a pig with their bare hands so you could eat something other than coconuts? That’s something to think about the next time you are standing in a crowd of people whom you do not know. Why, a meteor could hit the earth and spare this circle of people and you.
Do me a favor and think about that the next time you ask this Sacramento real estate agent where the Russians live. You want a real estate agent who has more than 30 years of experience and is a top producer representing you? Sure you do. Then, call Elizabeth Weintraub at 916.233.6759.
Why Did the Seller Reject Your Offer to Buy a Home?
If you’re looking for the secret about why the seller might reject your offer, you might be sorely disappointed in my answer. That’s because in just about every situation you can name in the Sacramento real estate market, it is the seller who chooses the buyer, not the agent. As such, the seller can have a bazillion different reasons why the seller prefers one offer over another. Yes, at this point you’re probably thinking: what about the listing agent’s input? Doesn’t the listing agent influence a seller’s decision? I believe that it is the listing agent’s job to guide, not to decide.
One way a purchase offer can gain traction is to be written correctly. This may sound overly simplified and you might wonder how anybody could write an offer incorrectly, but that’s obviously because you are not a listing agent in the greater Sacramento region. If you were a listing agent, you would know how offers can be written incorrectly.
Write the offer without mistakes is the number one rule.
It’s difficult to write a purchase contract without any mistakes. It means an agent needs to re-read MLS to make sure all of the directions were followed. Sometimes, listing agents insert tips or requirements into MLS, so it’s a good idea to review the confidential agent remarks and look for attachments in MLS. Veteran agents know that we live in strange times. It also means checking the correct boxes, making certain the buyer’s name is spelled correctly and matches the preapproval letter, double-checking the math and terms, using the right property address, including required documents, and so forth. Dot I’s. Cross T’s. Don’t give the seller a reason to reject your offer.
I can’t tell you how many offers the Elizabeth Weintraub Team gets accepted in Sacramento simply because the offer is written correctly. No other reason. It’s not our ranking or the fact that other agents respect us, it’s that our offers generally do not contain any mistakes. Because what is there for a seller to base a decision upon apart from price / net proceeds? In a short sale situation, for example, the seller isn’t even receiving any of the profits so price, while important, is really not a primary consideration. Commitment to the transaction is paramount, as is the ability to close escrow. In a short sale, you’ve gotta be willing to wait for short sale approval and be able to close without delays or hiccups.
A while back an agent changed the amount of the earnest money deposit in a purchase contract that I received. The amount was cut in half. It was simply crossed out and rewritten, without an initial. I did not know whether the agent changed the earnest money deposit or if the buyer had altered the contract, but in any case it was enough for me to question the buyer’s agent. I felt this was an issue the seller might want to know and she may raise the question herself. Why did the buyer lower the amount of the earnest money deposit on this short sale?
The buyer’s agent explained that the buyer did not want her money tied up for a period of possibly 3 months. Probably because she would be losing out on that whopping .5% interest rate paid by local banks — that 60 cents paid over 90 days.
The seller was looking for a committed buyer. A buyer who really wanted the home. A buyer who was willing for 3 months. This is a seller’s market in Sacramento. Many sellers receive multiple offers. Sometimes, a seller can receive a dozen purchase offers or more within 24 hours. In a short sale, many sellers are not looking for a reason to accept a purchase contract — they are looking for a reason to reject it so they can focus on the few offers that fit the sellers’ criteria. Try not to give the seller any reason to reject your offer.
