No Picture
Commercial Real Estate

Senate Bill 306 – How Does This Affect Short Sales?

Short Sales are confusing. But one of the more confusing things about short sales are all the rules and regulations that need to be followed in order to complete them. A recent law from the Senate is Bill 306. This bill was enacted to help the streamline the process of selling homes that are under water. Hopefully, I can lend my assistance and organize the some of the key points in this bill into a comprehensible format, so that you will have a better understanding of what it entails.
In the real estate market, a short sale is the sale of a property that is sold for less than what is owed to the bank. The bank receives all the money from the sale and may or may not return some of the funds to the borrower. Some California laws manage the real estate process. Generally, these types of real estate transactions help the banks by dodging foreclosure expenses, and stops borrowers from damaging their credit histories.
Bill 306
California Senate Bill 306 was signed in 2009. This bill helped clarify and create the rules and regulations for short sales in that state. A very important part of this bill affects the way lenders, normally the banks, deal with short sale offers. Prior to the new laws, banks were under no deadlines to answer these types of offers. The new law requires that lenders answer the offers within 21 days. So now, if a buyer makes an offer on a home that has already been approved for an underwater sale, the bank must accept the offer or refuse the offer within three weeks. Thanks to this law the process the real estate transaction is more likely to close. Making the process easier for all parties involved.
California Business and Professions Code, section 10131, states that a licensed real-estate broker must represent both parties in the sale of a property, and this includes short sales. It doesn’t have to be the same real estate agent representing both sides, but each side needs to have a real estate agent representing them. However, some parties attempt to get around this law. And so to preempt this, section 10139 of the same code states that failure to include a licensed broker during a short sale can result in fines or even imprisonment. Keep this in mind if you decide to purchase an underwater home. The last thing you need is to get in trouble with the law. This process is complicated enough as it is.
In the state of California, most people in mortgage situations expect to have a month or more of advance notice from a bank if foreclosure is imminent and short sale options are available. Furthermore, 306 includes types of properties that are owned and occupied by the borrower and that also include additional rental space up to four apartments or units. But, if the mortgage is at risk for any of these types of properties, short sales cannot be forced at the last minute.
When a licensed real-estate broker and escrow officer sign what is called “HUD1” the transfer of funds to purchase the property become nearly finalized. California law gives the banks, or mortgage lenders, four days to deny the offer, when a short sale escrow transaction is close to completion. If the lending institution does not formally deny the offer in this circumstance, the law states that the offer is automatically approved. This makes the process much quicker. since before this law a home could be in limbo for an insane amount of time But this law fast-tracks the process so sales can close significantly sooner.
There are many other regulations and rules that are apart of these Programs, but this is as simple as I can describe them. If you would like more information check the resources section of my website. Stay tuned for more information regarding HAFA and HARP. I plan on discussing these programs in the near future.…