SHORT SALE TRANSACTIONS

Considering a Short Sale? Learn the Process

When a homeowner is selling his or her 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 off their books, rather than foreclose and then have to resell the property. Depending on the net proceeds offered by the sale, the lender may decide to accept the offer if the net proceeds exceed the amount the lender would be likely to receive in the event of a foreclosure and resale. In the case of a foreclosure, the lender would get the property back, but would then have to safeguard the property, carry the property until it sells, perhaps incur costs preparing the property for sale, as well as closing costs in connection with the  sale. Ultimately what the lender or lenders agree to accept is the net proceeds in exchange for releasing the lien(s) on the property. 

Because short sales need to be documented, lenders will 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. A market analysis of the property provided by the real estate agent will confirm this value. The lender will also hire an independent agent to perform an analysis of the property’s market value, called a Broker Price Opinion or 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 chose to negotiate your short sale. Real estate agents can negotiate short sales, and you may chose 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. The negotiator needs to be able to work with the lender and trustee to postpone the foreclosure in some cases.  

There are advantages to hiring an independent negotiator to handle your short sale. The negotiator 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. Because the negotiator is paid separately and independently from the agent, the negotiator is motivated to assist you and to get the short sale approved. Often the negotiator is paid from the proceeds of the sale.

Depending on your circumstances, there may be other options available to you as well. It is generally to a homeowner's advantage to avoid foreclosure, because of the serious credit ramifications of a foreclosure. A foreclosure will affect your credit score and remain on your credit report for up to ten 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, perhaps seven years. 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 advisor 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, given your particular situation. Need Information? Contact the attorneys at Marine View Law & Escrow who successfully negotiate short sales on a daily basis.  Renee can be reached at renee@marineviewlaw.com or (206) 878-8777.

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.