SHORT SALES

Too many times, short sales can turn to no-sales. It can take 60 days or more for the mortgage holder to make its decision, says Jeff Marks, a real estate lawyer with Ryan and Marks Attorneys in Jacksonville. "(Buyers) have to have a stomach for it," he said. "But if they can wait it out, they will get a wonderful deal financially."

SHORT SALE Q&A

News
Short Sale Q&A
The increase in the number of short sales throughout the state prompted two legal questions from Mike Richardson, Association Executive of the Naples Area Board of Realtors. FAR’s General Counsel Randy Schwartz responds:

Q: If a real estate licensee lists a property at a below market price he knows the seller probably won’t accept, is the licensee in violation of Florida real estate license law?

A: Randy Schwartz: While a violation of the Florida real estate license law is a matter to be determined by the Florida Real Estate Commission, in my opinion, if a licensee lists a property for a price the licensee and the seller know is not acceptable, a case of misrepresentation and false advertisement can be made under Chapter 475.25(1)(c) Florida Statutes. It would not make any difference if the listing indicated that the selling price was subject to a third party lender or not; it is more a matter of advertising something that is known to not be acceptable.

Q: Is the seller in violation of any law if he states he would sell a property at a certain price even though he knew it would not actually sell at that price?

A: Randy Schwartz: I do not believe the seller would be violating any license law because Chapter 475, Florida Statutes, does not regulate the public. However, Chapter 817, Florida Statutes, might come into play for the licensee and a member of the public. Whether the seller could be held accountable for civil damages, due to his or her misrepresentation, would be completely determined by the individual facts of the case.

Short sales and the Foreclosure Rescue Fraud Prevention Act
Does Florida's new Foreclosure Rescue Fraud Prevention Act (F.S. 501.1377) prohibit real estate licensees from being involved in short sales? According to Florida Attorney General Bill McCollum in a letter to FAR President Chuck Bonfiglio, the answer is no, provided the only compensation sought by the licensees is the commission on the sale. The new law, which took effect Oct. 1, 2008, seeks to protect homeowners who face the threat of foreclosure from individuals who would prey on them.

McCollum's interpretation is based on the following scenario: A licensee secures a listing agreement on a home for sale, ascertains that the fair market value of the home is less than the loan amount, and lists the property at the lower amount. If a buyer agrees to pay less than the loan amount, the licensee then asks the lender to accept the lesser amount in order to avoid foreclosure.

"As long as there is no upfront or other fee for the negotiating service other than the normal real estate fee charged for the sale of the property, that activity [participating in a short sale] would not appear to fall under the provisions of F.S. 501.1377," according to McCollum.


Florida issues ruling on doc stamp taxes for short sales
The Florida Department of Revenue (DOR) issued its ruling stating that doc stamp taxes owed on a deed should be based on the sale price paid by the purchaser. The DOR ruling is effective immediately.





Best Practices

Protect your brand

Registration of your mark is not required, but it’s a good idea if you want to protect it. On the USPTO registration application, you must concisely list your trademark’s goods and services. You may use the federal registration symbol “®” only after the USPTO has actually registered the mark, not while the application is pending, and you may use it only for the goods and services listed in your federal trademark registration.



FREC Final Order

This Florida Real Estate Commission Final Order allows a sales associate to be paid a commission directly if the sales associate’s broker provides the closing agent with written authorization identifying the specific transaction, the sales associate to be paid and the specific amount to be disbursed.

FORECLOSURE VS. SHORT SALE

FORECLOSURE VS. SHORT SALE

Homeowner Consequences

Future Fannie Mae Loan –
Primary Residence
(effective May 21, 2008)

A homeowner who loses a home to Foreclosure is
ineligible for a Fannie Mae backed mortgage for a
period of 5 years.

A homeowner who successfully negotiates and
closes a short sale will be eligible for a Fannie Mae
backed mortgage after only 2 years.

Future Fannie Mae Loan –
Non Primary
(effective May 21, 2008)

An Investor who allows a property to go to
Foreclosure is ineligible for a Fannie Mae backed
investment mortgage for a period of 7 years.

An investor who successfully negotiates and closes a
short sale will be eligible for a Fannie Mae backed
investment mortgage after only 2 years.

Future Loan with any
Mortgage Company

On any future 1003 application, a prospective
borrower will have to answer YES to question C in
Section VIII of the standard 1003 that asks “Have you
had property foreclosed upon or given title or deed in
lieu thereof in the last 7 years?” this will affect future
rates.

There is no similar declaration or question regarding
a short sale.

Credit Score

Score may be lowered anywhere from 250 to over
300 points. Typically will affect score for over 3
years.

Only late payments on mortgage will show and after
sale mortgage will be reported as paid or negotiated.
This will lower the score as little as 50 points if all
other payments are being made. A short sale’s affect
can be a brief as 12 to 18 months.

Credit History

Foreclosure will remain as a public record on a
person’s credit history for 10 years or more.

Short sale is not reported on a credit history.
There is no specific reporting item for ‘short sale’.
The loan is typically reported ‘paid in full, settled’.

Security Clearances

Foreclosure is the most challenging issue against
a security clearance outside of a conviction of a
serious misdemeanor or felony. If a client has a
foreclosure and is a police officer, in the military, in
the CIA, Security, or any other position that requires
a security clearance in almost all cases clearance will
be revoked and position will be terminated.

A Short Sale on its own does not challenge most
security clearances.

Current Employment

Employers have the right and are actively checking
the credit regularly of all employees who are in
sensitive positions. A foreclosure in many cases is
ground for immediate reassignment or termination.

A short sale is not reported on a credit report and is
therefore not a challenge to employment.

Future Employment

Many employers are requiring credit checks on all job
applicants. A foreclosure is one of the most
detrimental credit items an applicant can have and in
most cases will challenge employment.

A short sale is not reported on a credit report and is
therefore not a challenge to employment.

Deficiency Judgment

In 100% of foreclosures (except in those states
where there is no deficiency) the bank has the right
to pursue a deficiency judgment.
In some successful short sales it is possible to
convince the lender to give up the right to pursuit a
deficiency judgment against the homeowner.

Deficiency Judgment
(amount)

In a foreclosure the home will have to go through an
REO process if it does not sell at auction. In most
cases this will result in a lower sales price and longer
time to sale in a declining market. This will result in a
higher possible deficiency judgment.

In a properly managed short sale the home is sold at
a price that should be close to market value and in
almost all cases will be better than an REO sale
resulting in a lower deficiency.