Real Estate Transactions: Short Sales

As a settlement agent with a profound level of experience working out short sale transactions, I spend the majority of my days on the job advising realtors/real estate agents on how to go about the short sale process. For those of you who are new to the industry, a short sale is essentially a petition to a lien-holder (a bank that holds a mortgage on the property) to release the corresponding lien attached to the property for less than the money owed on the loan obligation. Say for example I take out a loan for 500,000.00 to purchase a home, and five years later the house is worth only 350,000.00; thus, a sale of the property will not be sufficient to pay off the lien in full. By the bank agreeing to accept whatever sales proceeds are available after settlement related costs (sales commissions, real estate taxes, etc.) are deducted, the bank is agreeing to a short sale.

To efficiently go about a short sale, here are some key pointers for realtors, in particular listing agents:

1. List the property like you would in a regular sale – One of the most common questions I receive from realtors on a sale transaction is what to list the property for. Once a realtor finds out that the transaction is going to be a short sale, they seem to treat the process differently. They in fact should not. I always advise realtors to list the property like you would in a regular sale. In other words resort to the mechanisms that you utilize with any other listing. List the property for whatever price you truly believe the property is worth. Just because it is a short sale doesn’t necessarily mean the property is devalued (unless of course it is in fact damaged, etc.; hence devalued). A short sale is not a clearance sale at a department store for example. Instead it is a normal sale with a bit of unusual circumstances. Treat it as such. The bank will of course have its own appraisal done to assess what they believe the property is worth; but keep in mind that as a realtor, you are the expert. The bank’s assessment isn’t always right. If there happens to be a huge price discrepancy, a comparable market analysis may be helpful; but for starters, list the property at what you truly believe it is worth.

2. Verify that there is a financial hardship – There are two major components to a short sale: a justifiable hardship making the seller(s) unable to make the mortgage payments in the foreseeable future, and a sufficient purchase offer that meets the investor’s guidelines. At times, agents lose sight of the fact that without the first component, the lien-holder will not proceed to the second. Without a legitimate hardship (death, divorce, unemployment, distance commute to work, long-term sickness, etc.), the bank is unlikely to approve the short sale. Unless the bank is able to verify that due to certain financially crippling circumstances a borrower is unable to honor the note obligation, they will not accept a loss. Thus, it would behoove you as a listing agent to verify that there is in fact a legitimate hardship, before going through with the listing process. Otherwise, you may put in all the hard work just to eventually uncover that the bank is not going to entertain a short sale, as there is no hardship. Remember, a short sale is mechanism for the lien-holder to mitigate their losses, not a means for the borrower to back away from a bad investment.

3. Be Proactive – A short sale, contrary to the moniker, is a very lengthy process. They could take several months for a bank to render a decision on the short sale request. For that reason, you as a realtor must take any steps necessary to try to proactively expedite the process. Once you make the determination that it will be a short sale (by verifying the current payoff amount with the projected sales proceeds), advise your client to either begin putting together their short sale package (consisting of the application, hardship letter, proof of income, bank statements, tax returns, etc.), or if already gathered to go ahead and submit the financial package to the bank. Ultimately, this will speed up the process once a contract is ratified. Ideally, the bank would’ve made a determination on the seller’s eligibility to move forward with a short sale (by reviewing their finances) by the time a contract is received by the title company, or whomever is working the short sale. This would then enable the facilitator to focus strictly on the numbers (net sales proceeds), as opposed to the underwriting process to determine eligibility.

4. Set realistic expectations – While this may serve as a bit of a deterrent factor to the parties involved, especially the purchaser, it is important to establish that a short sale isn’t exactly an overnight process. While this is pretty common knowledge in the industry, you would be better served by doing your due diligence of letting the parties know that a) there is no guarantee of a short sale approval, and b) the duration of the process is out of your hands (or anybody’s for that matter), and can be quite lengthy. By establishing this from the get-go, you are setting realistic expectations for the parties involved. That way if a buyer is running against a quick timeline, it would probably be in their best interest to not pursue such a property. This is of course more of the responsibility of a buyer’s agent; however it would be beneficial for you as a listing agent to remind the buyer’s agent. This will ultimately eliminate the pressure that may be placed on you from the buyer’s side, wanting to close immediately.

5. Use an experienced facilitator – While the decision to be made on a short sale falls entirely in the hands of the bank, using experienced role players can be critical as well. First, the seller should use a real estate agent who has some exposure doing short sales, or at the very least is seasoned in conducting real estate transactions as a whole. Even further, using an experienced facilitator is key. I am a huge believer in the theory of exposure being the greatest teacher. Adequate exposure in the form of education, or experience, makes one an expert in the field exposed to. The same applies to short sales. Using an experienced settlement agent or third party liaison to work out your short sale can make the experience much more efficient. First, an experienced facilitator can provide you with an accurate overview of how the process may turn out per lienholder. While short sales are standard for the most part, each lienholder has certain nuisances that make their process difference. An experienced facilitator would be able to point out the differences in the beginning of the process, to make things move quicker. Secondly, and most importantly, an experienced facilitator is key whenever the parties run into issues. Troubleshooting is key in short sales. For example, what happens when the bank counters the offer? What happens when title work reveals more liens/judgements than what was previously disclosed? What if there is an IRS lien? An experienced facilitator would be able to provide guidance on how to address these issues.

In sum, while short sales may seem to be pretty complex transactions, they are very manageable when approached properly. While each short sale varies on a case by case basis, these steps provided above, if followed, can put a realtor on the right path to obtain a short sale approval and close on a short sale transaction efficiently.

Photo Credit:

Go Clean Credit

Nevada Senate Bill No. 538 – Internet Data Collection Bill

On June 12, 2017, Nevada’s Governor, Brian Sandoval, signed Senate Bill Number 538 into a law requiring internet website providers to disclose the type of information it obtains from internet users in the state of Nevada.  The bill, sponsored by Senate Majority leader Aaron Ford and Assembly speaker Jason Frierson, received overwhelming support from the Nevada Senate.  It requires any company or person who owns or operates an Internet website or online service for commercial purposes that collects information about Nevada residents and maintains minimum contacts with Nevada to make available a notice explicitly listing the personal information that the said operator is to collect from its clients.  In addition, the operator must allow the consumer to review and request changes to this information.  Failure to adhere to this regulation will first lead to a 30-day period to remedy a failure, or face a civil penalty imposed by the state attorney general.

In essence, this bill provides privacy protection to Nevada residents in lieu of the Federal Communications Commission’s Broadband privacy rules which have been repealed by newly elected President Trump.   The FCC privacy rules, which were set to take effect later this year, were designed to ban Internet Service Providers (ISPs) from collecting, storing, sharing and selling private information obtained from customers without their consent.  These set of rules would have required ISPs to obtain consumer permission before selling information such as web browsing history, location details, and app usage history to third parties for advertising purposes.  The repeal deprives consumers of this type of federal protection, leaving it up to the states to perhaps take steps in furtherance of privacy protection.

Nevada is one of several states to undertake such a measure to protect the interests of its residents.  Illinois is another state that has taken steps to protect the privacy interests of its people. For example, Illinois is working to implement the Right to Know Act in its state.  This law would require the operator of commercial websites or online services to make available certain personal information that has been disclosed to a third party, and to provide a way for customers to inquire further about said information, whether via email, or telephone.

While I do not believe that it is illegal for entities who own or operate an Internet website or online service for commercial purposes to obtain personal information from its users, I do think that they should have an affirmative duty to disclose to their clients the information being obtained, how it is being obtained, and how it is being used.  The onus shouldn’t be on the user to have to opt out of these arrangements after being essentially bound to a unilateral agreement by default.   After all, it is the commercial website service that gets to benefit financially from this endeavor.  Thus, the burden of seeking consent should be placed on them.

As a consumer, it isn’t unusual to expect that the information I provide to another party will be used solely for the intended purpose, unless otherwise stated.  Put differently, if I were to tell a secret to another party, it is implied that the secret would stay between the recipient of this sacred information and I, unless I were to agree for this message to be passed on to others.  Likewise, I believe it is reasonable to expect that the same principle would apply here in this context.

Opposition might argue that the majority of internet users will not willingly agree to have their information used for advertising if they in fact knew how their information was being used.  Others might also argue that the use of this information is for the benefit of the users themselves, as it will provide convenient shopping amongst other benefits.  To the proponents of the first oppositional point, I think this may present a challenge for perhaps new innovative ways of marketing, without necessarily infringing upon privacy rights.  To the proponents of the latter, if this disclosure would in fact educate users of the benefits of such information gathering, there ought to be overwhelming support, hence no foreseeable problems.

Further, I am not saying that entities who own or operate an Internet website or online service for commercial purposes shouldn’t be allowed to sell this information to third party clients.  Instead, I am simply asking that they seek the consent of the individuals who are essentially having their privacy rights infringed upon.   Since the users do not get monetary compensation, the least they can be provided is the ability/opportunity to give informed consent.  This would require simple disclosure, and the opportunity to grant or decline consent.  Since the Federal Government is taking a step back in providing this protection to citizens, more states should follow in the footsteps of Illinois and Nevada, and protect the privacy of residents.

In sum, I am in favor of Senate Bill Number 538 being passed as a law, as I believe it is a step in the right direction towards protecting the privacy of consumers online.  Entities who own or operate an Internet website or online service for commercial purposes should have the affirmative duty of disclosing to its users the type of information being obtained, how it is being obtained, and what it is being used for.  This will enable users to make an informed decision as to whether or not to provide this information and/or continue to use the service(s) being provided.  More states should follow suit.

Photo Credit:

https://themerkle.com/nevada-legislators-want-to-improve-online-privacy-protection/ 

Social Media Posts: Intersection of Privacy Rights and Free Speech

While many countries allow their citizens the freedom of expression through the press and other forms of communication, there is sometimes the need to limit this freedom, when it interferes with the reasonable expectation of privacy that others also have.  That was seemingly the case in Canada this past week. In the week of June 12, Canadian police arrested a Jeffrey Williamson, a man alleged to be the administrator of a “CanadaCreep” Twitter account.  This account is known to post photographs and videos of women, placing an emphasis on their “private parts” i.e. breasts, buttocks and groins.  While this account is known to have a variety of such footage, the charges were limited to only three videos which contained “upskirt” content of women in public places.  These videos were the only ones that were found to be a violation of the Canadian voyeurism laws on its face.  The other content of this page and others, while arguably a violation of one’s privacy, are seemingly permissible, despite the apparent invasion of a reasonably expectation of privacy.  With that, the lawmakers are faced with the difficult task of refining the criminal code to limit the freedom of expression afforded to citizens, in order to protect the privacy of all citizens. Of course, the question of where to draw the line is one that is very difficult to answer.

Canadian Law:

Canada, much like the United States has it set of rights and freedoms that govern the country.  The Canadian Charter of Rights and Freedoms of Part I of the Constitution Act of 1982 outlines these said rights and freedoms provided to its citizens.  In the second “amendment” of this rule of law, labeled fundamental freedoms, the following is outlined:

  1. Everyone has the following fundamental freedoms:

(a) freedom of conscience and religion;

(b) freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication;

(c) freedom of peaceful assembly; and

(d) freedom of association.

The freedom of opinion and expression is for the most part unlimited, unless it is clear violation of an existing criminal code.  For example, the three “upskirt” videos that Jeffrey Williamson was arrested for are seemingly a violation of R.S.C., 1985, c. C-46, s. 162, otherwise known as the criminal code on Voyeurism.  Under this code:

(1) Every one commits an offence who, surreptitiously, observes — including by mechanical or electronic means — or makes a visual recording of a person who is in circumstances that give rise to a reasonable expectation of privacy, if

(a) the person is in a place in which a person can reasonably be expected to be nude, to expose his or her genital organs or anal region or her breasts, or to be engaged in explicit sexual activity;

(b) the person is nude, is exposing his or her genital organs or anal region or her breasts, or is engaged in explicit sexual activity, and the observation or recording is done for the purpose of observing or recording a person in such a state or engaged in such an activity; or

(c) the observation or recording is done for a sexual purpose.

As evidenced by the code, the scope of prosecutable crimes is fairly limited to instances where nudity, or an expectation of the ability to be nude exists.  This essentially allows “perverts” to get away with other invasive acts which do not violate this code on its face.

What Can Be Done?

As it stands, the code on Voyeurism enables culprits to invade a reasonable level of privacy that many Canadian citizens may have.  While R.S.C., 1985, c. C-46, s. 162 1 (c) leaves room for argument by criminalizing such content obtained “for a sexual purpose,” this said purpose is fairly hard to prove.  As with most crimes, intent is hard to prove.  In this particular case, many could argue that these said pictures and/or videos are simply slice-of-life footage as part of “street photography.”  With that being said, it will be extremely difficult for Canadians to rely on subsection 1 (c) of the Voyeurism code to provide the privacy protection needed.

Peter Jacobsen, a media lawyer and member of the board of directors of Canadian Journalists for Free Expression, has called for an amendment of the criminal code to encompass protection of the victims affected by the acts of individuals like Jeffrey Williamson which go unpunished.  While Jacobsen is the equivalent of what we would consider a Free Speech advocate here in the United States, even he is in favor of amending the Criminal Code in a way that outlaws “creep” photography.

While legal theorists like Jacobsen believe that amending the current Criminal Code is easier in theory than in practice, they are exploring ways to perhaps revise the language of R.S.C., 1985, c. C-46, s. 162.  The revision is in the works, but I believe that a tweak to subsection 1 (c), or perhaps an addition of a subsection 1 (d) could be the solution.   Ultimately, the legislature should find a way to incorporate a provision that covers pictures and/videos that are objectifying by a reasonable standard.   For example, I believe subsection 1 (c) should be revised to read as follows:

(c) the observation or recording is done for a sexual purpose, or is objectifying in nature, by a  reasonable standard. 

This will ultimately open the door for the judicial system to assess such instances on a case by case basis, while maintaining somewhat of a reasonable standard.

Conclusion

In sum, governing bodies have the tough task of empowering citizens by allowing the freedom of expression while at the same time protecting certain liberties such as privacy.  In order to keep a balance and protect the innocent victims such as those preyed upon by the “CanadaCreep” and others of the like, the criminal code, i.e. R.S.C., 1985, c. C-46, s. 162 must be amended to adequately protect the subject class from such intrusive acts.

Photo Credit:

http://debatepost.com/2017/06/18/canada-creep-facing-child-porn-charges/