Central Valley, Stockton, Uncategorized

Who looses in a Short Sale?

Illustration by Sarah Lippincott

Sacramento, CA / Bilingual Weekly/California Department of Real Estate
To put it simply, a short sale transaction involves the sale of a property wherein a seller receives an offer from a buyer that is less than the amount of the mortgage loan(s) on the property. In order to complete the sale, the seller requests the lender to accept less than what is owed in order to allow the transaction to close. While short sales are a popular alternative to foreclosure, like all real estate transactions, they are complicated and sellers need to lookout for the pitfalls.
“The number of short sales is on the rise and many consumers do not understand the consequences of such a transaction,” California Real Estate (DRE) Commissioner, Jeff Davi said. For example, the Anti-Deficiency Statute law in California may protect the selling homeowner from the lender who may insist on collecting the difference after the sale, but to the IRS, that difference is a gain for the seller, so it will tax it… and the bank or lender will make sure that it is reported.
A May 2010 DRE Consumer Alert educates consumers and real estate agents to recognize the elements of a fraudulent or questionable deal. In some cases, a seller may be an unwitting participant in a fraudulent transaction wherein an unscrupulous agent or a short sale negotiator working with a straw buyer will make a lowball offer to the seller and in turn misrepresent the true market value of the property to the lender. If the lender accepts the offer, the straw buyer immediately re-sells it at the true market value, with the profits split among the conspirators. The losers are the seller, who must pay a larger tax for the difference between debt and selling price, and the lender, who gets less than the house’s fair market value.
The DRE list some key elements a homeowner should look out for when considering a short sale: Short sale negotiators must be licensed real estate brokers (or a licensed real estate salesperson where that person is working under the supervision of his or her broker); Any and all payments must be fully disclosed and made part of the escrow documents. If there are any fees to be paid “outside” of escrow, this may be the red flag that the payment is illegal; If your agent explains that the buyer is a fictitious person or entity, or your buyer is purchasing the property under a power-of-attorney or is a limited liability company (LLC), this may be a red flag that fraud is involved in your transaction; If you are told that an unlicensed processor, negotiator or facilitator is handling your short sale, this is a red flag that unlicensed activity is taking place. Only real estate licensees, California lawyers acting as lawyers and investors acting on their own behalf can engage in short sale negotiations.
For more details about short sale warnings, visit http://www.dre.ca.gov/pdf_docs/ca/ConsumerAlert_ShortSales.pdf
If you suspect that you are the victim of fraudulent short sale activity or any other real estate loan fraud, contact the DRE’s Enforcement section in Sacramento at (916) 227-0864, or via the Internet at http://www.dre.ca.gov/cons_complaint.html. In addition, you can report suspected scams to the California Attorney General’s Office at 1 (800) 952-5225 or at www.ag.ca.gov in the Internet.

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Bilingual Weekly News brings you community news in both English and Spanish, covering information such as Stockton News, San Joaquin News, Latino News, Hispanic News, Mexican-American News, Bilingual News, Government News, Political News, Arts News, Tracy News, Manteca News, Lodi News, Modesto News, Stanislaus News, Education News, Stockton Unified School District, San Joaquin County Office of Education, Health News, Environmental news, and much more!


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