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How to Sell a Short Sale With a Tax Lien
You can short sale a home with state or federal tax liens.
We just closed a short sale with a tax lien in Elk Grove. Tax liens are not a new thing; often when people fall into financial troubles, they end up owing the Franchise Tax Board (California state taxes) along with the usual suspect, the I.R.S. If things are so rough that you can’t make your mortgage payment, you probably can’t pay the I.R.S either. When you don’t pay the government, federal or state, the government files a tax lien against you, which is recorded in the public records of the county where you own property.
The interesting fact about personal income tax liens is a seller can sell a short sale with a tax lien because they can be released during the short sale. Ordinarily, you can’t close a short sale with outstanding liens in the public records because the buyer’s lender would object and refuse to close. It’s tough enough getting the short sale banks to understand that the personal income tax liens can be released to allow the short sale. The bank negotiators sometimes demand the tax lien be released before they will issue the short sale approval letter, which is ridiculous and impossible, so we just escalate the issue up the ranks until we find a more intelligent person to deal with.
Doing a Short Sale With a Tax Lien
The reason the government will release the tax liens is because there is no equity in the home to pay the IRS and / or Franchise Tax Board. You can’t squeeze blood out of a beet. However, it is gaining the cooperation of these government entities that is the chore. In Sacramento short sales, we deal with personal income tax liens quite a bit. Last year, it was easier to obtain the tax lien release. We could call the IRS, cry and beg, and some kind person would take pity on us and send the tax lien release. This year it’s been tougher.
The IRS office in Oakland disconnected its phone recently and said we are no longer allowed to call. We can’t email either. Everything has to be communicated through the ancient ritual of faxing. What’s next — smoke signals? Their paperwork states they won’t begin to consider a tax lien release until we have the short sale approval letter. In the event of two lenders, like this last Elk Grove short sale, we needed both letters. And then the IRS can take 60 days. Which means one if not both of the short sale approval letters will expire.
Ocwen made us start over from scratch on this last short sale with a tax lien. It took almost 6 weeks to issue the new approval letter. We recorded the day before the tax lien release expired. By the hair of our chinny-chin-chin. We received the final approval with 6 days to go before the tax lien release expired. The investor buyer had been waiting since October and had already spent his capital on other properties. He didn’t know if he could find the cash now. Well, guess what? Deposit funds or, if we have to start over from the very beginning, we won’t sell to him. He found the cash, and we closed.
And now for my commercial . . . if you need a Sacramento Short Sale Agent with extensive short sale expertise, call Elizabeth Weintraub at 916.233.6759. Don’t leave yourself vulnerable.
Closing a Rocklin Short Sale With Ocwen and PNC
This story of a short sale involves a home in Rocklin that other buyers passed over, while still others offered silly-ass verbal lowball offers, and everybody complained about the condition, like I could do anything about it. It was owned by a somewhat off-center, very charming guy who, according to his account, managed to ward off 24 trustee sales. His hardship was rock solid and he seemed to have a genuine interest in selling as a short sale, so I agreed to handle the sale for him.
I guess he had tried with some other Sacramento short sale agent but got nowhere with it. He was feeling a little leery, too, I could sense. The first thing I asked him to do was take down the bunker-style divider separating the back of the home from the front. He was reluctant because it kept his air conditioning bills low, but hey, sometimes ya gotta make a choice. Sell your home and pay a higher AC bill or not sell your home. Besides, he could always replace the army blanket after a showing.
At first I thought maybe I’d find an arsenal of army weapons or something on the other side, but it was just a television and table and a cute cat. The house was a little messy, but I could also see he had made an attempt to pick up things and clean for my visit. You’ve gotta choose your battle in a short sale. I waited while he dug through his boxes and boxes of stuff to find me the financials we needed, we signed all of the paperwork, and I shot the best photographs I could, under the circumstances.
Almost a month went by before we received a bonafide offer. When I say bonafide, I mean an offer from a buyer whose agent has promised not to write any more offers for the buyer and a buyer who has agreed to wait for short sale approval. Those are the two elements we need to close escrow. A bonafide buyer and a professional agent. The rest are moronic time-wasters. It was a really good deal for a buyer who wanted to get into an upscale neighborhood in Rocklin. I’ll bet they picked up 15% or more of equity for free.
The seller had not made a payment in 5 years. Sometimes these types of short sales result in foreclosure because the bank is tired of dinging around and decides to seize the home because it’s profitable. Contrary to what the public believes, banks make money on foreclosures. But an Ocwen short sale is a little bit different in that I believe Ocwen is still in government receivership, so we pushed the government program: HAFA. The second was PNC, often a pain in the butt for inexperienced agents to deal with who will run for the hills when they see PNC, but its loan had already been discharged through a former bankruptcy.
I figured the bank had already lost the paperwork, so I gathered the bankruptcy documents I knew they would request and a few other docs. The seller was very cooperative throughout the ordeal, which always makes my job easier. Under it all, he was really a sweet person who cared for his frog in the pond, a dog and a cat, and who just needed help. We finally received HAFA approval about 60 days later, which gave the seller $10,000.
The problem then was the seller had no credit and no money (until it closed) and no place to move.
The thing about bankruptcy, though, is it wipes the slate clean. You can’t file again for another 6 1/2 years, so people will lend you money, albeit high interest rates, but you can get it. The seller found a job, then a mobile home, sold off most of his possessions, and moved just in the nick of time. I asked him to make sure to clean the home so the buyer would not get mad at the buyer’s agent. Did NOT want to hear the buyer was upset at closing. Because buyers will the blame their buyer’s agent, even though it’s not the buyer’s agent’s fault.
This Rocklin short sale closed like a charm on Friday. The home was so clean it astonished the buyers. They could not believe how beautiful their new home appeared to them. My seller got a fresh start, a new life, and that neighborhood in Rocklin got new homeowners. That’s a good ending to any story. It makes what I do worthwhile. When nobody else will take on a troublesome short sale, this Sacramento Realtor will do it and close it.
Why Buyers Waited 6 Months for a West Sacramento Short Sale
Here is an example of a short sale in West Sacramento that sold at the end of October and could not close until the middle of April. It certainly was not the buyer’s fault, even though that is usually the case. It was not the seller’s fault, either, nor either of the agent’s. It was due to the lovely combination of an Ocwen lender combined with Nationstar as the second lender with MI on top of the cake. Those Ocwen / Nationstar combo short sales can be complicated to bring the two sides together, but it is generally much easier when Ocwen is the first and Nationstar is the second than the other way around, let me tell you.
Plus, as some lenders do, and I’ve been gripping about this practice until the cows come home but no legislators seem to do anything about it, and nobody else seems to care, is the second recently attached mortgage insurance. They do it after the fact when they know the home is underwater. There are companies that ensure worthless paper, and they make a profit. Why isn’t this against the law? If for no other reason, notwithstanding the profit on another’s suffering, is that on a combo loan, a borrower is promised there will be no mortgage insurance, as an incentive to buy using a combo loan package. Then, when the borrower is hurting, underwater, and struggling, the second lender slaps on mortgage insurance, which can help to mess up their short sale?
We received approval from Ocwen on this West Sacramento short sale in December, but Nationstar held out for more money. They managed to string out the process until February, at which point I went back to Ocwen and asked them to revise the approval letter because the HAFA now fell under the new HAFA short sale guidelines. It meant that the seller would have received $3,000 as a relocation incentive under the previous guidelines, but as of February 1 is now entitled to receive up to $10,000.
To get the seller the additional $10,000, we had to go through another month or so of waiting for Ocwen to revise its approval letter. The difference of $7,000 might not seem like much in the overall scheme of things, but it makes a HUGE difference to a person trying to start over with her life.
Bottom line, in this West Sacramento short sale, I got the sellers the newly approved $10,000 incentive, Nationstar got its demands met, and we closed. We are very grateful to the buyers for their patience in this ordeal. Not every buyer will wait 6 months to buy a home. But think about the price increases during that period of time! The buyer got an excellent price and a beautiful home in West Sacramento. It can be worth it to wait for that short sale approval.
Is the Third Time a Charm in a Sacramento Short Sale?
There is a saying in the Sacramento short sale business that the third time is a charm. Agents who sell a lot of short sales might chuckle over this statement because it’s absolutely true. We don’t want to sell a home more than once, but sometimes, there is no way around it, no matter what we do. Apart from forcing a buyer we’ve tied to a chair in an empty warehouse to listen to Stuck in the Middle With You, we can’t really interrogate them.
OK, that was just a sick joke. But when you sell a home a third time, that’s where your mind goes and the sellers follow that thought process, too.
As the seller’s listing agent, I do comb through the supporting documentation sent by the buyer’s agents and try to make sense of an offer for my sellers. For example, I recently received a cash offer from an investor with proof of funds attached. In the proof of funds — which was outdated by more than 30 days rendering it unacceptable to a short sale bank — were a series of checks drawn in the sum of $1,000. The funds in the account were barely enough to buy more than one house. What does that tell you? Yeah, they promise they aren’t making other offers, and it’s possible they have a sick relative somewhere they’re routinely sending $1,000 checks to, but I kinda doubt it.
We closed an escrow last week that had been in the works since spring. This was a home in Antelope that was a short sale with two loans, one of which had been discharged, and then a third lien popped up during a title search. This was a judgment against the seller, so the home could not be sold without its release, and the short sale bank sure as heck wasn’t gonna allow payment of that. But I’m used to the tough deals.
We sold the home the first time to a buyer who appeared qualified. After we received short sale approval from both the first, Ocwen, and the second lender, GMAC, the buyers’ lender re-evaluated their financial situation. Somehow, that situation had changed, and the buyers no longer qualified.
We sold the home a second time to a cash buyer who was very eager to close. Somewhere along the line this buyer decided she was paying too much for the home because, after all, she had a sister who bought a home nearby who paid less. Didn’t matter to her that the homes were not comparable to each other, she canceled. Cash buyers can be fickle.
By the third time we sold the home, GMAC, the second lender, had sold the worthless piece of paper to a collection agency, so we had to get a new third party authorization, wait for a new account number to be assigned, and then submit to the new second lender. Plus, the seller had long ago vacated. We figured the judgment creditor would probably now want additional interest, but they were happy just to get paid, thank goodness. We received approval and closed last month, just after we discovered a water leak in the laundry room.
Like I said, the third time is a charm. If you want an agent who will sell that house again and again if need be, call Elizabeth Weintraub at 916.233.6759. As a top Sacramento short sale agent, I possess a lot of patience.
