•· What is a short sale?
Answer: A "short sale" is a real estate purchase where the proceeds of the sale are not sufficient to pay the secured creditors (lenders) of the property, and the seller does not have the funds to pay the difference. Since the lenders are receiving less than what is owed to them, all of the lenders must consent to receiving less than owed in a short sale transaction in order for them to release their lien(s) on the property and allow the sale of the property to close.
•· How does a short sale work? As the seller, what do I need to do?
Answer: First, consult an experienced real estate attorney who is familiar with short sales, and the foreclosure process, who can independently advise clients about their options. Second, list your property for sale with an agent who understands the short sale process. Third, be prepared to complete lender forms, as well as a hardship letter, financial worksheet and to submit updated financial documents such as bank statements, pay stubs and tax returns.
•· Can I still sell my property in a "short sale" if I am in foreclosure?
Answer: Yes, if you have chosen a good real estate attorney, it is likely that the attorney can get the foreclosure date postponed if you have received an offer on your property and are in the process of "short selling" your property. However, there are never any guarantees that the lender will in fact postpone the foreclosure, so it is important to receive an offer as soon as possible so the lender has time to review the offer and approve the short sale.
•· How long does it take to sell property in a short sale?
Answer: That depends on how soon you can get your property in the market and receive an offer. After you receive the offer, and submit your paperwork to the attorney, the process can take from two to three months to get approved and then the buyer will generally need 30 days to close after that. The entire process can be completed in as little as two months or it can take six months or longer.
•· Since the bank is getting less than what is owed on the mortgage, will I have to pay it back later?
Answer: That depends on the terms of the short sale approval letter you will receive from the lender. Your attorney should carefully review the letter and advise you of the terms under which the short sale has been approved. The lender may be accepting the short sale as full settlement of the amount owed and will "waive the deficiency." In other cases, the deficiency is not addressed in the letter, and the seller should understand that the lender may still have the option to pursue you personally for the debt. If you have a second mortgage as well as a first mortgage, the lender will often accept a small amount to release their lien, but will not "waive the deficiency" but will accept a settlement or payment arrangements to address the balance. Individual cases vary so it is best to consult an attorney for advice in your particular situation.
•· How much will it cost for me to sell my property in a short sale?
Answer: Generally the lender will pay the traditional seller closing costs involved in the short sale, as well as real estate commissions and attorney fees. Occasionally there are fees that the lender will not pay, and these may be paid by another party to the transaction. However, if your attorney has negotiated a settlement with one of your lenders, such as a second or third lien holder, you would be responsible to pay the settlement amount.
•· How do I know if a short sale is the best option for me?
Consult an attorney at Marine View Law & Escrow, who is experienced at advising clients, will explain your options and will help you make a determination about how to proceed in your particular situation. Alternatives discussed may include foreclosure, short sale, bankruptcy and settlements. There are often additional factors that may influence their recommendations such as whether you occupy your home or whether it is an investment property, how many loans you have on the property, your financial situation, as well as your short- and long-term goals. After speaking to me, a real estate attorney, you should also consult an accountant and credit adviser for more information regarding potential tax liability and impact to your credit rating.
For more information, please contact me, attorney Renee Roman, at Marine View Law & Escrow. Email me or call 206-701-6564 to schedule an appointment.