January 25th, 2011 at 10:13 pm
As you all know, FHA loans have become more prevalent in our market over the last few years. As a result, it is more important for us to be on top of FHA’s requirements for various loans. In that regard, you should all be aware that as of January 1, 2011, condominium developments must meet tougher requirements in order to be FHA approved. For example, FHA now requires that no more than 10% of the development’s units may be owned by one investor and at least 50% of the units must be owner occupied. Below is a link to a copy of an article from the January/February 2011 edition of California Real Estate discussing the new rules in detail. As always, let us know if you have any questions.
FHA.pdf
January 21st, 2011 at 10:05 pm
As you have heard from us multiple times, in the world of short sales, the words “outside of escrow” are “dirty words.”? No payment can be made outside of escrow and the short sale lender must know everything that is going on.? In an article from the California Property Law Journal, Shannon Ball Jones agrees, writing as follows:
In short sales, agents are sometimes asked to allow payments outside of escrow. For example, if the senior lender permits the junior lender to accept only $2,000 of the sales proceeds, the junior lender occasionally will ask for a larger payment outside of escrow. This is not only a breach of the senior lender’s terms, but constitutes lender fraud. Senior lien holders are now asserting claims against title companies who allow payments outside of escrow, which are not listed on the HUD-1 closing statement or are contrary to the lender’s approval letter. It is likely that in the future, lenders will consider pursuing claims against agents. All payments should be on the HUD-1. If any payments deviate from the senior lender’s approval letter, permission from the senior lender must be obtained.
January 21st, 2011 at 9:43 pm
I got a call today about a short sale listing that is similar to numerous calls I have received before.? The facts typically go something like this:? We have a short sale listing.? An offer is accepted by the seller and sent to the short sale lender for approval.? After submission of the full short sale package, the bank approves the deal.? Unfortunately, because of how long the process has taken, the buyer has found another property and has walked.? Since there is time remaining before a foreclosure, our listing agent moves quickly to relist the property and wants to advertise it as an “Approved Short Sale” at the price of the prior offer. Can she do that?
Unfortunately, the answer is no.? The short sale bank is entitled to analyze every offer from each individual buyer on its own merits and will almost assuredly do so.? As a result, the fact that an offer from Buyer A was approved at $500,000 does not mean that an offer from Buyer B at the same price will be approved.? Buyer B may have worse credit than Buyer A, the terms of the offer may differ and be less advantagous to the bank or the market may have changed and the bank’s view of value may have changed.? Regardless, each deal stands on its own and we therefore cannot advertise any specific price as having been approved.? Of course, if you have preapproval of a short sale under HAFA or the like, that is a different story for a different post.? For now, just understand that in a normal short sale, no price is “Preapproved.”
January 18th, 2011 at 9:08 pm
We have received? numerous calls about escrow companies who, in a short sale transaction and? in exchange for the escrow, are offering to negotiate the short sale for “free.”? There are numerous problems with this practice and it should be avoided at all costs.? First, as you know, short sale negotiators must be real estate licensees since the DRE believes that negotiating? a short sale is “licensed” activity.? Unfortunately, most escrow officers that I have dealt with are not licensed and therefore cannot perform this function.? Next, and perhaps? more importantly, the escrow is required to be the neutral third party in our transaction.? Since negotiating short sales is licensed activity, by doing the negotiating the escrow officer would essentially be representing the seller.? That representation is obviously a breach of their duties to the buyer.? After all, how can an officer? maintain? their neutrality in the escrow process when? they have an extra? relationship and fiduciary duty to only one of the parties to? the? escrow?? ? The conflict of interest should be obvious.? As a result,? please do everything possible to avoid? using an escrow officer? as a negotiator and, if the client insists on doing so, please advise them of these problems, in writing.? These concerns are obviously greater when we represent the buyer but should apply regardless.? This is just a terrible business practice that we should not condone.
