As you may or may not already know… senate bill 306 was just signed by our govener.  Based on the recent changes this is what you should expect:

Senate Bill 306, signed into law this September, changes some of the rules for California real estate short sales . Much of the excitement around this legislation is a revision to Civil Code section 2943 that provides, when an owner/borrower submits to the lender a “short sale request,” the lender is required to accept or decline it within 21 days.

This excitement overlooks what is required by the statute to trigger the lender’s duty to respond quickly. The statute describes a short sale request as a written request that includes;

A. A copy of an existing contract to purchase the property for an amount certain;

B. A copy of the short-pay agreement in the possession of the entitled person.

C. Information related to the release of any other liens on the property, if
any. Item B, the “short pay agreement,” is further defined as an agreement in writing in which the beneficiary agrees to release its lien on a property in return for payment of an amount less than the secured obligation.

It appears that the procedure is as follows:

1. The prospective seller must first have in hand an agreement with the lender
agreeing, in advance, to a short sale. But there is no deadline for the lender to
provide the agreement, nor discussion of whether the agreement specifies how much the lender will accept. On its face, the statute allows the lender to provide the agreement, but not accept a short sale if it is for less that one dollar below the total owed.

2. The owner/borrower the gets a bona fide purchase offer, and makes a short-pay request.

3. The lender then has 21 days to respond, setting forth whether they accept
the existing offer, or specifying the price and terms they would agree to a short sale.

I’m not sure how this will really benefit the consumer as the only adverse effect to the lender is a minimal fine, and there are challenges as to when the time frames truly begin… If you ever worked with a short sale, they don’t always receive everything you send them, packages get lost or placed in the wrong department, etc… however I’m hopeful that this is a step in the right direction…  your thoughts?