Frequently Asked Questions
Short sales are complicated real estate matters and if you are considering this option, you may have many questions. Tim McFarlin of McFarlin LLP spoke to Orange County Register’s John Gittelsohn to answers some important questions about short sales.
Q. How Did You Develop This Practice Area?
A. There are many consumers in distress and many people to help; this practice area is in great demand. Many distressed borrowers are people who initiated loans through subprime lenders. What’s happening now is a lot of folks don’t have equity they were expecting, and can’t refinance as they hoped. Often, the best solution for these borrowers is a short sale to stop foreclosure.
Q. What’s the Advantage of a Short Sale?
A. A short sale is when the borrower can’t maintain mortgage payments, and the bank allows the property to be sold at a loss instead of going all the way through foreclosure process. With a short sale, the consumer typically doesn’t have a foreclosure or a deficiency judgment. The consumer hopes to walk away with his or her credit mostly intact. (Note: By law, if the owner still has the original purchase loan on the property and sells the home for less, the bank can’t go after the seller for the balance of the loan. However, the difference could be treated as income by the IRS.)
Q. Why Would They Hire an Attorney?
A. Frequently, when the borrower doesn’t have equity, there’s not a lot to fight over. You’re only talking about some possibly unlawful fees and damages. But it’s not as easy as it seems to do a short sale. You need your documents presented properly and you need to get them together fast. If it’s not done right, the bank will move you through to foreclosure.
Q. How Much Does It Cost a Client?
A. The fee to represent a client in a short sale can vary. There are realtors out there who will offer to do a short sale for free, but that’s not who you want representing you. Realtors just want to “take a shot” at putting the deal together with no legal background or ability to address issues that often arise, such as allegations by the bank of mortgage fraud.
Q. As a California Foreclosure Attorney, You Represent Borrowers in Truth-in-Lending Act Lawsuits. What Happens in These Cases?
A. The Act requires an accurate disclosure that shows how much monthly payments are going to be, and the total finance charges, among other things. What happens frequently is the terms change and there are new, previously undisclosed, fees and charges that are only disclosed when it’s time to sign all the loan documents. The mortgage company is required to give the borrower a rescission period, a three-day cooling-off period, after the documents are signed, but when they sit down to sign the loan documents, the client doesn’t have much time to reflect.
Q. Is There Any Lender You See More Than Others in These Truth-in-Lending Cases?
A. There are so many different companies out there, so many different corporate structures; it’s hard to know who is actually involved in each loan sometimes. I have had a couple of cases with People’s Choice and New Century, who have each filed for bankruptcy protection. I had just one with Quick Loan Funding. That loan was transferred to Countrywide for servicing. It’s hard to keep up with the changing face of the mortgage industry.
Need Assistance Buying or Selling With a Short Sale?
Whether you are selling your house as a short sale, or you are interested in buying a short sale home, McFarlin LLP in-house brokerage Clear Point Real Estate Services can meet all of your needs. We want to make your short sale process a success and protect you from the complications that can arise with short sales. We offer free consultations to prospective clients. Contact us today at (888) 728-0044, or email us.