by Elizabeth Hurd
The March, April and May issues of Arizona REALTOR® included numerous articles on short sales, REOs, foreclosures and loan modifications. In the June issue, AAR included a quiz to help you determine how much you learned about these hot topics. Find out the answers here!
Q: Do Arizona’s anti-deficiency statutes apply to all properties?
A: No. For the anti-deficiency statutes to apply, the property at issue must be a duplex or a single family residence; the real property must be two and one-half acres or less; and the loan at issue must be a purchase money mortgage.
A purchase money mortgage is one where the loan proceeds are used to acquire title to the property. A refinance of a purchase money mortgage is also considered a purchase money mortgage for purposes of the statute. A HELOC that is obtained after the close of escrow is generally not considered a purchase money mortgage.
Assuming all three of these requirements are met, the Arizona anti-deficiency statutes apply. What this means is that the lender’s remedy will be limited to regaining possession of the real property at issue through a foreclosure process or otherwise. If the anti-deficiency statutes apply, even if the amount due to the lender exceeds the value of the property, the lender may not pursue the borrower for the difference or deficiency. The anti-deficiency statutes can be found in A.R.S. Title 33, Chapter 6.1.
Q: Does the Mortgage Forgiveness Debt Relief Act of 2007 exclude any debt forgiven through foreclosure or a short sale from being treated as 1099 income for tax purposes?
A: No. The Mortgage Forgiveness Debt Relief Act of 2007 (Act) created limited circumstances under which sellers facing a foreclosure can be granted a relief from this requirement if they are able to work out a solution with the lender such as a short sale, where part of the debt is forgiven. To be afforded protection under the Act, the debt must be considered qualified principal residence indebtedness. Also, the total debt must be less than $2 million (or $1 million for married couples filing separately).
Q: In a short sale, when do the time periods in the contract begin to run?
a) Upon delivery of the accepted offer to the lender
b) On the date the offer is accepted and signed by both parties
c) Upon delivery of the Short Sale Agreement Notice to the buyer
A: The date of the seller’s delivery of the Short Sale Agreement Notice to the buyer is deemed the date of contract acceptance for purposes of all applicable contract time periods. In other words, although the parties have entered into an enforceable contract, the time periods do not begin to run until the seller has delivered the Agreement Notice. In the event that the seller and lender are unable to reach an acceptable short sale agreement, the seller must notify the buyer and the contract is cancelled due to the unfulfilled short sale contingency.
Q: My buyer wants to make an offer on a short sale property. Do I have to lower my commission?
A: No. As a cooperating broker, you are entitled to the amount of commission specified in the offer of cooperation. You may enter into an agreement with the listing broker to accept half of whatever commission the lender will allow, although this is not required. If the listing broker refuses to pay the amount of commission specified in the offer of cooperation, you may pursue them for the balance.
Commission agreements should be handled professionally at all times. Understand that the listing broker is in a difficult position, making an offer of cooperation when the lender might come back and condition their acceptance on a lower total commission. Since you are aware of this possibility before making the offer, it would be wise to come to an agreement beforehand regarding how any commission reductions will be handled.
Note: A.A.C. R4-28-1101(D) states: “A licensee shall not allow a controversy with another licensee to jeopardize, delay, or interfere with the initiation, processing, or finalizing of a transaction on behalf of the client. This prohibition does not obligate a licensee to agree or alter the terms of any employment or compensation agreement or to relinquish the right to maintain an action to resolve a controversy.”
Q: I represent the seller in a short sale transaction. We have received multiple offers on the property. Must we submit every offer to the lender?
A: No. All accepted offers must be submitted to the lender. So, once the seller has accepted an offer, it must be submitted to the lender. Unless otherwise prohibited, the seller may accept subsequent offers as backup offers. However, once accepted, these backup offers must be submitted to the lender as well.
Q: Are all REOs sold “as is”?
A: Yes. The bank/seller will normally not offer any warranties or guarantees. However, in some limited circumstances, the lender may be willing to negotiate a price which allows for needed repairs. If this is a concern for the buyer, they should submit an inspection report together with estimates on the cost of needed repairs. There is no guarantee the lender/seller will agree to reduce the price.
Q: Can anyone qualify for a loan modification under Obama’s Making Home Affordable Plan?
A: No. The Program, effective March 4, 2009, includes many restrictions. The Program is only available for owner-occupied properties, and therefore no investors will qualify. Furthermore, the maximum loan amount for a single family residence is set at $729,750.00. The plan includes a few different scenarios under which a home owner may qualify to modify their existing loan. The home owner should talk with their lender honestly about their situation. The lender will be able to determine if there is a modification option available, based on the information they provide.
Q: Is a foreclosed home owner allowed to remove appliances from the home after foreclosure?
A: Yes. Appliances, unless they are considered fixtures, are normally classified as personal property and belong to the home owner. However, any appliances built-in, such as a built-in microwave or range hood, would likely be considered fixtures and stay with the property. Some foreclosed sellers have been known to “strip” a property after foreclosure. However, foreclosed home owners should be advised that removal of fixtures constitutes criminal theft pursuant to A.R.S. §13-1802. The lender can file criminal charges accordingly.
Note: The lender may also be able to file a civil lawsuit against the previous owners for “waste” due to the wrongful removal of the fixtures.
Elizabeth Hurd is a curriculum writer who has written continuing education courses for real estate agents, including AAR courses for rCRMS and GRI.
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© 2009
June 2nd, 2009 at 7:43 am
THANKS FOR THE UPDATE AND INFO. IT WAS DEEMED VERY EFFICIENT.
June 9th, 2009 at 10:48 am
Thank for the question regarding multiple offers on short sale listings. I have quite a few short sale listings and I am inundated with calls and additional offers after an initial offer has already been accepted by the seller and sent to the lender.
I think because of the verbage on the short sale addendum, agents think if they submit a higher offer after the seller has already accepted another offer that
their higher offer will automatically bump out the 1st offer. It seems only fair that we submit these back up offers only if the first offer is cancelled.
In essence the bank is going to appraise the property first and then accept or counter the first offer - so shouldn’t the first buyer be given the first right to accept or reject the lenders offer? I would prefer to handle these offers the same as any transaction.