Banks seem to be more willing to sell homes for less than what is owed. For the first time, short sales have outnumbered foreclosures in America.
According to new figures released by the Arizona Regional Multiple Listing Service Inc., areas like Mesa and Scottsdale saw increased foreclosure and short sale activity in the month of March.
If you have been following my Real Estate Law Blog posts you may have already read about some of the recent legal developments related to foreclosures and short sales in Arizona. However, in light of a new Court of Appeals case just decided last month, I felt it was time for a summary of these recent developments. Construction Loans and Home Improvement Loans: A ruling last month by the Arizona Court of Appeals in the case of Helvetica Servicing Inc. v. Pasquan answers important questions in the law and may impact anti-deficiency protections for some people. This case involved the refinance of an original purchase money loan, in which the borrower was loaned additional funds. The additional funds were primarily used by the borrower: (1) to reconstruct a large portion of the home, and (2) for home improvements and related purposes. The Court of Appeals ruled on several key issues that have been in dispute in Arizona. The Court laid out the following rules to follow when determining whether a refinanced loan or construction loan will be given purchase money status under Arizona law in certain situations and thus, afforded anti-deficiency protection in the judicial foreclosure context: A refinance of a purchase money loan, whether by the original lender or a new lender, does NOT destroy purchase money protection to the extent the loan proceeds from the refinance are used to satisfy the underlying purchase money loan. A construction loan given to borrower that is (1) secured by a deed of trust that covers both the land and the dwelling to be constructed on the land (provided the dwelling is a qualifying property under the anti-deficiency statute), and (2) actually used to construct the dwelling, [...]
House Bill 2584, just introduced, would prevent both first and junior lenders from suing a borrower for the remaining debt on their loan if the lenders agree to a short sale. The new law would be added to Arizona's anti-deficiency laws, A.R.S. 33-729 (as 33-729.01) and A.R.S. 33-814 (as 33-814.01).
Rental scams abound in today's volatile housing market. In his witty Scam Alert article, Anatomy of a Rental Scam, Jay Thompson provides a play by play account of his experience with a scamer advertising on CraigsList. Be careful, it's scary out there.
If you are thinking about trying to short sell your home, first be sure you can answer the following questions: 1. Have you evaluated your specific situation to determine whether you believe your lender will approve a short sale, based on your personal circumstances? 2. Do you know what important protections to look for in an offer submitted by a potential short sale buyer before accepting the offer? 3. Do you understand why certain contingencies contained in a purchase offer are critical for your legal protection as a seller? 4. Do you understand that a lender’s approval of your short sale does not automatically release you from further liability for the debt? 5. If your lender approves a short sale offer, are you at risk of your lender requiring a cash contribution from you in order to obtain the lender’s approval? 6. Do you understand the three most common terms and conditions in lenders’ short sale approval letters and what they mean to you? 7. If you are not happy with the bank’s terms and conditions, what are your options? 8. Do you have a second loan on the property and do you understand the potential obstacles that can be caused by a second lender? 9. If your lender does not approve your short sale, do you fully understand other options that are available to you and the ramifications of those options? 10. Are you aware of the tax consequences arising from canceled debt after a short sale and the exemptions or ways to mitigate tax liability that may be available to you? Many people experience frustration and are sometimes faced with unexpected legal liability because they didn’t understand the risks, rights and options related [...]