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San Jose Short Sales – Time Bombs & IRS Tax Liens

By
Real Estate Broker/Owner with KD Realty - 408.972.1822 CA DRE#01366594

It’s important that San Jose Real Estate agents who work with San Jose Short Sales understand the complexity of working with short sales. It is equally important that the escrow officer at the title company is also trained and highly proficient in working with short sales.

Many of the properties my buyers viewed were San Jose Short Sales. After several months of searching San Jose Homes for Sale, my buyers found a short sale that was placed back on the San Jose MLS. The property fit their home criteria perfectly. The kitchen was a little smaller than they ideally wanted, but they knew it was a home they could live in ... and they would be willing to wait out the short sale approval process. We quickly submitted a full price offer! The following is a summary of events:

  • July 9, 2010 buyers offer submitted.
  • July 10, 2010 Seller accepts offer.
  • September 22, 1010 - San Jose short sale lender approvals received.
  • Close of escrow scheduled for October 21, 2010.
  • Property inspections, appraisals and all disclosures delivered and signed according to purchase agreement time lines.
  • October 15, 2010 - Home Seller signed all documents at Old Republic Title Company.
  • October 15, 2010 - San Jose Home Buyers signed loan docs at Old Republic Title. San Jose Real Estate agent, Kathleen Daniels and buyers lender were present.
  • October 18, 2010 Buyers complete final walk-through of the property.
  • October 18, 2010 Buyers wired over $100,000 in funds to close escrow.
  • October 18, 2010 @ 3:11pm, Escrow Officer Rosa Avila sends an urgent email with the subject line: Delay in close of escrow.

Time Bomb

Email message: IRS informed me today that they will not provide a release or any kind of written confirmation of release for their liens until approx. 11/30/10. I am currently contacting the short sale lenders to request an extension.

Background:

  • The original preliminary title report dated 4/12/10 provided with seller disclosures did not show IRS tax liens.
  • Two days before the close of escrow the agents learned about updated Prelims dated 7/1/2010 and 7/29/2010 which reflected Federal Tax Liens in the amount of $9,610.53 and $55,380.97.
  • Old Republic Escrow Officer first contacted IRS regarding the lien on October 13, 2010.
  • The Short Sale approval letters are contingent upon the transaction closing on or before October 29, 2010.
  • Buyers interest rate lock of 4.125% expires on October 30, 2010.

In Santa Clara County Sellers (Listing Agents) typically choose the title and escrow company. The liability of a San Jose Real Estate agent selecting a title and escrow company that causes a short sale not close ... is huge.

The only reason this San Jose Short Sale did not close on October 21, 2010 is because the escrow officer at Old Republic Title Company was, shall we say, remiss in attending to her duties as an escrow officer.

  • We have no guarantee of an extension of time to close the San Jose Short Sale.
  • We have no guarantee of when the IRS tax lien will be released.
  • Old Republic Title Company advises they "are working on it."
  • Old Republic Title Company has not responded regarding a commitment to make my buyers whole if the lien is not releases and escrow does not close on or before October 29, 1010.

San Jose Real Estate agents must understand the importance of choosing a title and escrow company. All escrow officers are not trained and highly proficient in short sales. Failing to choose the right company may result in the reason San Jose Short Sales do not close; buyers and sellers are damaged; and after working 4-6 months do not receive their hard-earned and well deserved paycheck.

 

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DRE#01366594

I specialize in probate real estate.
As a Certified Probate
Real Estate Specialist
my focus is on helping Executors and Administrators
avoid headaches
before they start.

“From the moment we met Kathleen, we were impressed with her professionalism, knowledge, patience, respect, humor, attention to detail, and compassion.  She's the Whole Package ~ excellent agent and wonderful human being!  In a potentially stressful experience, we have felt in good hands all along.  We are so grateful and recommend her without hesitation!”

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Comments (11)

Melanie Ross
Coldwell Banker Solano Pacific - Benicia, CA
Benicia CA & Vallejo CA Real Estate, 707-319-2828

Ouch I am so sorry the escrow officer should have pulled a title sooner and not so close to closing, ouch ouch.  That hurts, however I am sending good thoughts it will work out.  There have been some IRS liens on some short sales in our office that got resolved.  I hope everyone sticks with it and gets it done. 

Oct 24, 2010 01:30 PM
Bob "RealMan" Timm
Ward County Notary Services - Minot, ND
Owner of Ward Co Notary Services retired RE Broker

Kathleen,

Short sales are rare here but I have been involved in two. After the first one, which failed, I swore "I'll never do that again" but here I am 2 months into another. I'm going to add that I believe that BOA is Satan himself.

Bob

Oct 24, 2010 01:32 PM
Troy Funk
Allison James Estates & Homes, Sarasota 941-957-3737 - Sarasota, FL
Broker / Associate

The title company working with the listing agent is Critical to the success of the Short Sale.  Good Post - thanks for sharing.

Oct 24, 2010 02:10 PM
Peggy Hughes/pha logistix, inc.
pha logistix inc - San Francisco, CA
SF NYC LA

So sorry Kathleen that you and your buyer's are having to deal with the inefficiency of an escrow officer. Hope this has a positive outcome.

Oct 24, 2010 02:51 PM
Pat Haddad, ABR, CRS, ePRO, GRI
Keller Williams Indianapolis Metro NE - Carmel, IN
Carmel, Fishers, Westfield IN Real Estate Expert

Kathleen~~Just reading your post made me weary.  How frustrating!  Surely there is some recourse here for all parties involved.  We have to be able to depend on all puzzle pieces doing their jobs on these short sales.  They are going to be around for a looonnnggg time! 

Oct 24, 2010 04:19 PM
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate Services

Melanie, Interestingly the 7/29/2020 Second Amended title report did show the IRS tax liens. It appears the escrow officer either did not read it, or read it and forgot about it. Waiting until 10-13-2010 to start the lien release process … with a close on 10-21-2010 just makes my head spin. When I asked her why she waited so long she said … this is a short sale … there is no equity in the property to pay the lien … they have to release it. I did not think it would be a problem. I’m hoping this will be resolved as well. Thanks for your comment and well wishes!

Bob, You are so funny … I’ll bet you will end up doing more short sales … there are too many to easily avoid … and BoA may well be Satan himself. Thanks for your comment.

Troy, I just read your post on short sales and Homeowners Associations preventing a short sale. So many things can go south with short sales … all parties need to know what they heck they are doing! Thanks for your comment.

Oct 25, 2010 05:46 AM
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate Services

Peggy, We remain hopeful. We have 5 days to close or we are at risk of starting over and/or the property foreclosing. Just when I think I have seen it all in the world of short sales … something like this happens. Thanks for stopping by.

Pat, I agree. Short sales will be around for a long time. I imagine there is recourse … the title company legal counsel is now involved … and I will be contacting an attorney today. We all worked so hard to get to the closing … at minimum I will do whatever it takes to ensure my clients are made whole. Thanks for your comment.

Oct 25, 2010 05:46 AM
The Villages Realty
The Villages Realty - San Jose, CA
"Our Performance Will Move You!"

Nice post Kathleen.  Your posts are informative and appreciated.     

Nov 16, 2016 09:40 PM
Eagle Ridge Realty
Eagle Ridge Realty - Gilroy, CA
"Our Performance Will Move You!"

Kathleen, excellent post.  Always informative and we know you are the agent one should use when buying their San Jose home.   

Nov 16, 2016 10:06 PM
Eagle Ridge Realty
Eagle Ridge Realty - Gilroy, CA
"Our Performance Will Move You!"

Love the posts that are about local listings and statistics.  Good job.

Oct 06, 2017 07:49 PM
Nancy Frimann
Eagle Ridge Realty/Signature Homes & Estates - Gilroy, CA

Hoping some business comes to you.  Great localized post.

Aug 29, 2018 12:00 PM