Q 14. What does the Code require of a representative of the equity purchaser?
A A representative of the equity purchaser must:
Provide written proof to the equity seller that the representative has:
a valid, current California Real Estate Sales License (broker or salesperson); and
a bond from an admitted surety insurer in an amount equal to twice the fair market value of the property.
Provide a written statement, under penalty of perjury, that the agent:
has the above license;
has the above bond; and
has complied with the above by providing written proof to the equity seller.
The written statement under penalty of perjury shall be provided to both the equity seller and equity purchaser prior to transfer of any interest in the subject real property.
Should these requirements not be fulfilled, the equity seller may choose to render the purchase contract void. Even if the seller cancels, the equity purchaser is liable for all damages caused by the failure to comply with these requirements.
(Cal. Civ. Code Â§ 1695.17.)
Q 15. Are such bonds by an admitted surety insurer available in California?
A Such bonds are not currently available.
Q 16. Why was this apparently impossible bonding requirement placed on licensees?
A The answer to this is somewhat unclear. The bonding requirement may have found roots in a section of the Code concerning the liability of equity purchasers. Under this section, an equity purchaser is liable for all damages resulting from any statement or act committed by his/her representative. Even though the equity purchaser may not always directly control every act of the representative, the law as written places indirect legal responsibility for such conduct on the purchaser of a residence in foreclosure -- a form of strict liability. The equity purchaser is also liable for his/her/their representative's conduct in any manner connected with the acquisition, receipt of any consideration from or on behalf of the equity seller, or the performance or non performance of any act prohibited or required by the Code.
As the legislative history indicates, because some equity purchasers turned to thinly-veiled corporations and independent contractors whom they controlled to circumvent the 1979 law, the legislature in 1990 imposed these requirements on all buyer's representatives.
V. Exemptions from the Home Equity Sales Contract Law
Q 17. Do these laws ever allow a buyer to purchase a residence in foreclosure without placing impossible restrictions on the buyer's representative?
A Yes, when a buyer acquires title in the manner as follows:
For the purpose of using the property as a personal residence;
By a deed in lieu of foreclosure of any voluntary lien or encumbrance of record;
By a deed from a trustee acting under the power of sale contained in a deed of trust or mortgage at a foreclosure sale;
At any sale of property authorized by statute (such as a tax sale);
By order or judgment of any court (such as probate or family law court); or
From a spouse, blood relative, or blood relative of a spouse.
(Cal. Civ. Code Â§ 1695.1(a).)
The Code has specifically excluded these buyers from the definition of an equity purchaser. Stated otherwise, these types of buyers are "non-equity" purchasers.
Q 18. Could you provide examples of these exceptions?
A For example, an equity purchaser is normally not a purchaser at a trustee sale, a foreclosing holder of a trust deed or mortgage (beneficiary) who receives a deed in lieu of foreclosure, a transferee at a sale authorized by statute such as under a probate proceeding, or a transferee under a court-ordered sale such as in a marital dissolution proceeding.
In addition, persons who acquire title from their spouse, a blood relative, or a blood relative of their spouse are not equity purchasers under the Code. The exemption that applies to more situations than any other is that a person acquiring title to a residence in foreclosure for the purpose of making it a personal residence is not an equity purchaser.
Complicated?? Yes. There is currently legislation in place to resolve the obvious issues associated with this new ordinance. Consult your tax advisor or real estate attorney for more specific details. Good luck!
I've practiced real estate in a market where 80+% of the properties on the market, were short sales. I know a thing or two about it ;-)
In 2008 when this question was asked, short sales where a nightmare... now they are still difficult, but with the right agent and team you can have a successful experience!
My team is processing about 14 transactions at this time and we have close more than that in the last 12 months...
We often get calls from my broker friends that need to short sale the properties they own... and they chose me and my team to help them... so we are good, and prod of it.
Our firm is an integral part of your team.
I am actually looking to get back into the loss mitigation arena on a part time basis. I currently work for Wells Fargo in their Wealth Management division. Prior to accepting this position, I underwrote home equity loans for Wells Fargo, but I actually started in the loss mitigation department of Wells Fargo where I completed short sales backed by both Fannie Mae and Freddie Mac. I received top performer honors twice for each investor and had one month of 70 closed and 138 approved short sales. Should you need any assistance or guidance, please feel free to contact me at email@example.com.
Feel free to contact me anytime, I have extensive experience in both as a listing agent and buyers agent with handling short sales.
Have a great day,
Heather Paul, Realtor
Best of luck!
Ron Escobar, MBA
Los Angeles Short Sale Realtor Specialist
Reality is, many of the most experienced short sale agents in the country don't have any "certifications". There is no substitute for experience, and THAT is one of the main things a consumer should primarily base their decision on.
Of course, you'll want an agent who is experienced in the short sale process and can help you negotiate the pitfalls. Look for an agent who is certified - CPDE, SFR or another recognized short sale designation.
But realize this - in a short sale negotiation, the seller's lender(s) drive the bus. They are the ones who approve the deal and the agents can only provide them all the info they need to make the decision. So make your offer a good one, and understand that you as the buyer and your agent really have no control over the deal.
Heather Peck, SFR
Just a quick update concerning the case that held the bonding requirement unconstitutionally vague and unenforceable. The CA Supreme Court refused to hear the case on March 27th, 2008. Is it cause to celebrate yet. I don't think so. The case is binding authority on all CA trial courts and the Appellate Division which rendered the decision. It's only persuasive authority in all the other CA Appellate Courts. I think it's time for the legislature to either repeal the bonding requirement or pass a new law that will pass judicial scrutiny. I heard C.A.R. plans on revising the NODPA in light of the court decision and the new revised version is scheduled for release the week of April 27th. We'll just have to wait and see what it says.