When a homeowner is selling his property for less than the amount owed to the lender, this is called a short sale. Lenders don't encourage this practice. However, in today's market, the lender may agree because it may be better for the lender to get the property sold, rather than foreclose and then have to resell the property later. Depending on the net proceeds offered by the sale, the lender may decide to accept the offer especially if the net proceeds exceed what the lender would receive after reselling the property after foreclosure. In the case of a foreclosure, the lender would have to safeguard and carry the property until it sells and incur costs preparing the property for sale. What the lender agrees to accept is the net proceeds in exchange for releasing the lien(s) on the property.
Because short sales need to be documented, lenders require financial information from the seller demonstrating that the seller has a genuine lack of ability to make the payments and repay the loan. Perhaps the seller has lost a job or been laid off by their employer. Perhaps divorce, death or other medical problems have caused difficulty in maintaining payments. If the seller is not financially capable of making up the short fall, (the difference between the sale and the debt owed), the lender may require an evaluation of the financial situation of the seller. It is the responsibility of the seller to provide tax returns, pay stubs and any other related financial information including other debts. A good real estate lawyer, someone who handles short sales, will know how to best present the information for a favorable decision. The sale price should be equal to or slightly better than what they would be able to sell the property for if they did opt for foreclosure. The lender will hire an independent agent to perform an analysis of the property's market value, called a broker price opinion (BPO), to ensure fair market value.
Every lender processes short sales differently. The process can take from several weeks to several months, depending on the lender and on the negotiator you choose to negotiate your short sale. Real estate agents can negotiate short sales, and you may choose to work with an agent to accomplish this goal. However you may decide to hire an individual or firm to negotiate a short sale for you. Negotiators spend hours working with the homeowner and listing agent, obtaining and processing documents, and on the telephone with lenders, preparing packages for presentation to the lender or servicing institution in order to ultimately get the short sale approved by the investor. They have to have good negotiation skills and be relentless in their pursuit of short sale approval. There are deadlines to meet, and often upcoming foreclosure dates which may need to be postponed. A good short sale negotiator has the necessary skills in order to work effectively with the lender and trustee to postpone the foreclosure in some cases.
There are advantages to hiring a real estate attorney who is an experienced short sale negotiator to handle your short sale. The attorney is working on behalf of the seller and can work with the seller's agent to get the short sale approved, is generally someone who is familiar with short sale procedures employed by lenders and can devote the time to getting your short sale reviewed and ultimately approved in a timely manner. The attorney represents the seller and is paid independently from the agent, often from the proceeds of the sale.
Depending on your circumstances, there may be other options available to you. It is generally to a homeowner's advantage to avoid foreclosure because of serious credit ramifications. A foreclosure will affect your credit score and remain on your credit report as a public record, for up to 10 years after the foreclosure is reported by the lender. It is believed that a short sale will have a far less negative impact on your credit report and may be reported for a shorter period of time. With a short sale, a homeowner may have a chance to rebuild their credit sooner, and possibly qualify to purchase a home in the future, much sooner than in the case of a foreclosure. Homeowners should consult a credit adviser to determine the impact a short sale may have on their credit report. A short sale may present a good opportunity to avoid foreclosure, but there may be alternatives, in your particular situation. Need information? Contact me, an attorney at Marine View Law & Escrow who successfully negotiate short sales daily.
Contact Marine View Law & Escrow, P.L.L.C.
I provide a confidential consultation to all new clients. To arrange a meeting with me, attorney Renee Roman, contact me by email or call my office at 206-701-6564 or 877-449-4819.
Remember, the information on this website is informational in nature and should not be considered legal advice appropriate for your situation. Individual circumstances vary, so for best results contact an attorney who can assess your needs and determine whether a short sale is right for you as a homeowner.