Beware of the evil clowns of Los Angeles short sales

Of course I couldn't go a month without saying something about short sales, right? Lately, I've been made aware of new and different scams perpetrated on short sale sellers in Los Angeles and the San Fernando Valley.  If you or anybody you know is thinking about selling short, there are a few things you should know to protect yourself. 

First and foremost, you shouldn't pay any money to anybody upfront to handle a short sale for you.  They get paid through the commission when the sale closes.  This is California law.

Second, you need to sign all legally binding contracts, starting with the listing paperwork.  No matter how dire your straits are, please take the time to review the paperwork your Realtor gives you.

Third, you'll need to disclose everything you know about your property in standard forms.  Your Realtor can help you fill these out, but don't let him/her do it for you.  You're liable for non-disclosure long after escrow closes.

Fourth, yes, you do have a say in who buys your place, and the terms and conditions of the sale.  You'll sign off on this paperwork, too.  You're probably thinking, "But I'm walking away with nothing in a short sale; why should I care?" Well, there are many contractual terms that still concern you besides money, such as when possession will be given to the new buyer (negotiable), what appliances stay, whether leases are still in force, etc.  One thing to know: you can't short sale your property to a relative.  The bank will insist that the transaction be "arms length."

Five, and this is important, you can take your property off the market (just in case, say, you get a windfall and no longer have to short sale it).

Remember, sellers, your short sale negotiator/Realtor is working for you, first and foremost.  Don't be afraid to ask questions.  If you'd like to educate yourself more about the process, the California Department of Real Estate has lots of info on its website, as does the California Association of Realtors.

L.A. Times "message" from C.A.R. re short sales

I was surprised and pleased to find a full-page "message" from the California Association of Realtors in the first section of today's (3/10) L.A. Times.  (Since it's a paid announcement, there is no link.) It is an impassioned plea to streamline and speed up the short sale process.

'Bout time.  CAR claims to have advocated for improvements to short sale guidelines with major banks, U.S. Treasury officials, government-sponsored entities and others to standardize the process, comply with federal guidelines, increase staffing, etc.

CAR is also "calling on regulators, elected officials, nonprofits, business organizations, companies, and individuals ...to resolve this issue and others that get in the way of a recovery."

Here in So. Cal., you know that short sales can be up to 50% of a particular local market.  I also believe short sales -- or the way they are NOT conducted by the banks -- are partially responsible for the current market slowdown in many areas.  They are a large part of the market inventory, and nobody wants to go through the long, agonizing process of trying to buy one. (Seriously, I'd take 10 court confirmation-required probate sales over one short sale.) Hopefully, the C.A.R. message will be heard by our major mortgage servicers.