By Larry Hotz, All Denver Real Estate Editor
Some Colorado Counties, like Adams and Weld, have suffered from massive foreclosures and short sales. In a short sale, some of the mortgage loan debt is excused by a lender just to sell a property at a lower price. This year, the Colorado Real Estate Commission is addressing these issues by requiring new forms and teaching Realtors how to use them in its Annual Update Class.
That class is taught by Oliver Franscona, Boulder Attorney and veteran continuing education instructor.
He and I have been faculty members together at the Colorado Association of Realtors occasionally teaching both continuing education and the GRI Program. In this class, Oliver presented the new forms, explained when they were required and made suggestions how to use them.
The new Short Sale Addendum is required whenever a contract is accepted subject to an existing lender accepting a lower loan payoff than what is owed. This debt is forgiven by the lender. The form addresses critical issues in short sales that protect the Buyer. For example, if lender approval of the short sale is not obtained by a certain date, the contract automatically terminates. Of course, the Buyer can usually extend that date because most Sellers and Lenders are anxious to close the property. But, at least a Buyer isn’t “held hostage” to a lender’s short sale approval for months and months. That happens often.
The form also explains the short sale process to both Buyer and Seller. It points out that there may be a better option for a Seller than a short sale. It advises that legal and tax council should be consulted. While current law protects Sellers in some cases, there still could be tax liability for “forgiven debt”. Technically, that is the same as income.
The new Foreclosure Addendum is required to be used when a property is actually in the legal foreclosure process. So, it would not be used, for example, in a short sale because no foreclosure proceedings have yet occurred. The Foreclosure Addendum explains that the Seller has the right to cancel the sale within 3 days following signing a contract. It also provides that the Seller will receive no compensation before the end of the right to cancel.
Most interesting to me is that it states that the Seller speaks English as the principle language. This is because unscrupulous Buyers have taken advantage of primarily Spanish speaking Sellers and used a contract to deceive them about the terms of the sale.
Again, this is particularly true in Adams and Weld counties which have had a huge influx of legal and illegal immigrants from Mexico. Many were able to buy homes but have since been unable to make loan payments. Several lenders who tricked these folks into getting loans they couldn’t repay in the first place are being prosecuted. One was recently extricated from Mexico to face charges in Weld county. So, deception has been used to get Spanish speaking buyers into loans. Now, it is being used to take advantage during the foreclosure process.
So do you have a question about foreclosures or short sales? If so, just use the form below to contact us and we will answer your question. Be sure to give the general location of the property so we can have the right Foreclosure Expert answer your question.