A few thoughts about short sales.

Katie and I just returned from the CDPE training. We learned so much, it was a great experience. I would highly recommend it to any Realtor with whom I am not in direct competion for business.
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We learned a couple scary things. A lot of the adjustable loans out there have not adjusted yet...we have a huge supply of loans made at the end of the boom and a large array of "exotic" loans which have not come to their stress points yet. That is scary.........but don't run in fear!
Two great websites to look at for statistics are:
trendgraphix.com
or
brokermetrix.com
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Another interesting point coming up is the role Realtors are playing in short sales. We are Realtors. We list, show and assist our clients in selling our buying their homes. When did we become debt negotiators as well? Is debt negotiation in our scope of duty? If not, will our errors and omission insurance cover us if we have legal problems in the future? Are we going to see a lot of class action lawsuits against Realtors for advising our clients in these transactions?
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We have a lot of Realtors running around telling people false information. Have you heard any of these:
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1. Don't worry about consequences after a short sale. If it is your primary residence the lender can't come back after you, even if they foreclose.

• NOT TRUE. True, Oregon is a non-recourse state, lenders can't go for deficiency judgments (provided you meet certain criteria such as owner occupied). What nobody is saying is they can still sue you after the fact for not honoring the terms of the promissory note. Do they? Historically, not often, but we are in a whole new world right now. We can't say what they will do in the future.
  

1. Because of the Mortgage Forgiveness Debt Relief Act of 2007 you don't have to pay tax on a 1099 for the deficiency.
   

• NOT TRUE. The MFDRA is only valid for OWNER OCCUPIED homes. And you cannot have refinanced with a cash out loan. If you did refinance you can still be eligible for the debt relief IF and ONLY IF you used the refinance money in order to pay off the original loans or used any cash out for improvements to the property. You can't have a cash out refinance where you took a $50,000 chunk of change and partied like a rock star for a few weeks.
  

1. If you don't qualify for the MFDRA you can just say you are insolvent. Then you do not owe any tax.

• NOT TRUE. Insolvency isn't that easy. Your amount of debt forgiveness has to exceed your assets.

This blog post is not to be considered legal advice, it is ONLY my opinions and thoughts. You should always consult competent (there is the important word) and appropriate professionals. Appropriate professionals for this subject would include , but not be limited to: CPAs, lawyers, and financial planners.