Forgiven Debt Can Rebound as a Deficiency After California Short Sale

By
Real Estate Agent with Lyon Real Estate BRE #00697006

The thing about the internet is you can find information that supports just about any point of view. It's kinda like wandering down the street and asking passersby what they think about any particular topic. You'll get a wide range of opinions. You might even get a popular viewpoint that could be completely wrong. But because you're a democratic kind of person, you probably believe that the majority can't be off their rockers and it must be true, when it is not.

Some of this information could even be an article I have written for About.com. I sometimes write opposing viewpoints. Why would I do that? Because I can. And because I get paid for it. And because diversity is good. Sometimes there is no black and white but there are many shades of gray. Especially when it comes to a short sale.

I try to explain to my sellers that every short sale is different. I tell them they can go talk to their neighbors, coworkers, family members, and all of them will give them different advice. Some people think they are an expert because they know somebody who did a short sale. Who doesn't? When you've got much of Sacramento underwater and hurting, you know a lot of people who have either closed a short sale or gone through foreclosure. They all have an opinion they think is the gospel truth.

They could be dead wrong when it comes to you, though.

So, you've got to decide early on whom you will believe. Will you believe your Sacramento short sale agent who has closed hundreds of short sales? Or, will you believe Uncle Harry? Uncle Harry might be an expert on fly fishing or baseball or how many Budweisers he can chug before passing out but when it comes to short sales, you're better off trusting the pros.

If you don't trust your agent to give you accurate information, then you shouldn't hire that agent. Last year I made the mistake of taking on a short-term client who had a big problem with trust. Soon as I put her listing into MLS, she decided to sell to her neighbor. I tried to explain that she would be required to sign an arm's length affidavit, which stated she had no relationship to the buyer and did not know the buyer. In fact, I would be required to affirm that I had no knowledge of a pre-existing relationship as well. Which I can't and won't lie about.

This seller disagreed. She hadn't read the arm's length but she did an internet search. She concluded because her neighbor was not a blood relative, she didn't have to disclose the relationship. I don't know where people come up with this crap. That point of view isn't even logical. She was adamant, though. I canceled the listing. Because the thing is if you don't have trust, you don't have a fiduciary relationship with your client. If I don't have a fiduciary relationship with my client, I have no business trying to represent the client under those conditions.

Every short sale is different. Every short bank is different. Every short bank's investors are different. There really are no cookie cutter short sales. In California, if you don't disclose certain facts, you could be guilty of mortgage fraud. If you have committed fraud, the bank might be allowed to pursue a deficiency, even after your short sale has closed. Then all the work you did to do a short sale could be in vain.

That release of liability you thought you had could vanish. You could suddenly discover that the difference between the price you sold at and your loan balance is now due and payable to the bank. There are consequences for lying. That's the thing some people don't stop to consider while they're thumbing through the internet and reading crap on their cellphones.

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Elizabeth Weintraub is an author, home buying expert for About.com, a Land Park resident, and a veteran real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento, as well as tract homes in Elk Grove, Natomas, Roseville and Lincoln. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area with an emphasis on Elk Grove. Call Elizabeth Weintraub at 916.233.6759. Put 40 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. BRE License # 00697006.

The Short Sale Savior, by Elizabeth Weintraub, available with free shipping.

Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate. Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice; it could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.

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Topic:
Home Selling
Location:
California Sacramento County Sacramento
Groups:
California Short Sales, REO's, and Foreclosures
Legal Aspects of Short Sales, Foreclosures, Loan Mods
Lyon Realtors
Short Sales Specialists
Short Sale REALTORS®
Tags:
arms length affidavit
arms length
mortgage fraud
debt forgiveness
deficiency
short sale
sacramento short sale agent

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Show All Comments
Rainmaker
233,579
David Grbich
Ventana Coastal Properties - www.FindCARealEstate.com - San Juan Capistrano, CA
Orange County Real Estate - 949-500-0484

Great advice Elizabeth - lots of information online and lots of room for error in interpreting it - best to hire an experienced short sale agent like yourself. Regards Dave

Jul 10, 2012 07:34 AM #1
Rainmaker
1,223,964
Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents
Lyon Real Estate - Sacramento, CA
Put 40 years of experience to work for you

Hi Dave: You know, some people have asked me if I report mortgage fraud to the FBI. The answer to that question is no because I do not participate in mortgage fraud nor knowingly represent sellers who do. I have no reason to want to cause harm to other people, much less ignorant or mean people.

Jul 10, 2012 07:46 AM #2
Rainmaker
426,367
Jim Patton
Century 21 M&M - 209-633-2839 - Turlock, CA
Realtor - Stanislaus & Merced county Realtor.

But Elizabeth, my cousin's next door neighbors, sister said...   You are right about all the "experts" out there.   I think every time I list a house I hear something like that. 

Jul 10, 2012 03:44 PM #3
Ambassador
1,932,651
Chris Ann Cleland
Long & Foster REALTORS®, Manassas, VA - Bristow, VA
Associate Broker, Northern VA

There are a lot of folks out there that think they know the answers because they did a short sale of their own home (with the help of an agent I'm sure) but still feel free to dole out advice as if they have a crystal ball and know the outcomes.  I'd trust you 110% with any short sale because you've seen about every wrinkle in the process there is to see.

Jul 10, 2012 04:20 PM #4
Rainmaker
1,223,964
Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents
Lyon Real Estate - Sacramento, CA
Put 40 years of experience to work for you

Hi Jim and Chris Ann: Sellers need to consider the source of their information. For example, you don't ask a trial lawyer a real estate question and you don't take advice from some random's agent's website. In fact, you shouldn't even take what I have to say if it has to do with a legal or tax question because I can't answer those types of queries. But if involves a question about bank guidelines, and I've closed piles and piles of those short sales, I probably do know the answer.

Jul 10, 2012 04:27 PM #5
Rainmaker
985,744
James Dray
Wise Custom Realty - Bentonville, AR
AR., MO., or OK. I can find the home for you.

Good morning Elizabeth communication and trust are as valuable as your good or not so good name.  Great post as always enjoy the day

Jul 11, 2012 04:34 AM #6
Rainmaker
160,681
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

I'm in this boat right now. wellsfargo short sale where the buyer is the neighbor (a few houses down). However, in this case, the buyer is currently renting and is buying to live in the property.  I wonder if that will fly with Wellsfargo.

Jul 11, 2012 02:07 PM #7
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Rainmaker
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Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents

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