SHORT SALES

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Foreclosures, pre-foreclosures and short sales are the talk of the day. But what do they mean? The answer is different according to who is asking it:
 
SELLERS:  If you are a person in danger of losing their home and are trying to understand what your rights or options are these words mean one thing.
 
BUYERS:  Whether you are a person looking for a new home or an investor looking for an opportunity in a favorable market the short sale is an attractive alternative to REO's or regular sales. Beware, short sales take a long time and every kind of transaction has it's advantages and dangers. Ask us to guide you and you will be bringing year of experience to the table, that will save you time and money in the long run.
 
REALTORS: The last few years have brought a radical change to the real estate market. Short Sales are one of the most common type of transaction occurring today. The next most common form of transactions are foreclosures (REOs). Both require contract creation and alterations. The Florida Board of Realtors has special contracts for you to fill out, but your client needs something beyond what those form have to offer, you need to have a professional that has a profound understanding of what is required to insure you keep receiving referrals from a client that was well informed and well treated.

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The Florida Board of Realtors limits the scope of a realtor's liability in contracts to using forms created for them by the FREC and by FARBAR, these do not always accomplish the complicated tasks required of a good purchase contract. An experienced Attorney will make sure that your client's rights are protected and that you comply with the regulations and rules.

 

WHAT IS A SHORT SALE? A “Short Sale” or “negotiated settlement” or “short pay” occurs when a Lender agrees to accept less than the amount owed to payoff a loan as an alternative to foreclosure. If the property is worth less than the amount owed on the loan, then even if the Lender forecloses and takes back the property, they know they are going to take a loss. My office can often convince a Lender that they will “do better” if they take less than what is owed now rather than taking the property back by foreclosure and trying to sell it later.

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HOW LONG WILL IT TAKE? The Short Sale negotiation process is a lengthy one. It may take several weeks or more likely several months to get an approval. Many Lenders have many layers of bureaucracy, insurance companies, and investors that we will have to maneuver through in order to get a Short Sale approved. So it is important to be patient during this long process.

Will I have enough time?

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Just starting a Short Sale will not automatically stop a foreclosure. However, many times we can convince a Lender to stop the foreclosure to let us attempt to negotiate the Short Sale. So, while there are no guarantees, it is better than not trying..

CAN I STAY IN THE HOUSE? The key word in “Short Sale” is sale. The purpose of a Short Sale is to get the property sold. So you will be moving. This is not a program that can stop a foreclosure and allow you to keep the house indefinitely.

It will be easier to sell the house if is vacant, so you should make plans to move quickly once you have made the decision to take this route. But you don't need to make the move until you have an approval from the lender and know that a buyer will qualify to complete the transaction.

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HOW DO I KNOW THIS WILL WORK? You don’t. We cannot, have not, and will not make any promises to you that this will work. Once you missed a payment, the Lender is in charge and can proceed to foreclosure if they want to. But we know they do not want to and we are very good at presenting alternatives to the Lender that they often want to accept rather than foreclosure. We are very good at what we do, but NO PROMISES are being made as to whether or not the Lender will accept a Short Sale –they may or may not.

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WILL I GET ANY MONEY FROM THE SALE? MAYBE. A universal requirement of Lenders in granting a Short Sale used to be that the borrower would not get any proceeds from the sale of the property. The Lender was going to take a loss on your loan –they did not want to let you get any money. Since late 2011 there has been a change of heart by some lenders. They are willing to pay you to pursue the short sale option. This is not being practiced by all lenders but a significant amount of large lenders are making this a new trend in the industry

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WHAT HAPPENS IF THIS DOESN’T WORK? Your home will likely go to foreclosure. A Short Sale is something we try after you have exhausted your other options.

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WHAT IS A “RELEASE”? A Lender may offer to “release” it's security interest against the property in exchange for less than the total amount of the note. A release will allow the property to be sold without paying off the full obligations of the note. However, the note is not satisfied.

Advantages: This successful Short Sale will allow the property to be sold and thus avoid a foreclosure.

Disadvantages: The remaining debt on the Note (sometimes called a “deficiency”) still exists. You are still liable for the full balance of the note – in other words – you still owe the money.

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Reality: It is not likely that the Lender will pursue the deficiency unless you have other significant assets, and if you don’t try a Short Sale and the property goes to foreclosure, you are likely to have a deficiency anyway.

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WHAT IS A “SATISFACTION?”: A Lender may agree to accept less than it is owed as complete and total satisfaction of the note and release its lien against the property.

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Advantages: Your note and obligation to the Lender are satisfied for less than you owe. When the property is sold, the debt is paid off completely.

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Disadvantages: You may have some tax consequences that you should discuss with your tax advisor due to the fact that the Lender is making money you owe disappear. You may receive a 1099 form for this forgiven indebtedness “income”. Sometimes our negotiations are successful in obtaining a satisfaction. Sometimes all we can get is a release.

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- See the link in "RESOURCES"  about: the Mortgage debt forgiveness act of 2007

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HOW CAN I HELP? The Lender will require a review of a financial package that usually includes: two months’ bank statements, two month’s pay stubs, two years’ IRS tax returns and other information. The leading cause of delay and even denial of our offer to the Lender is caused by the Seller failing to deliver these items in a timely manner. To help us succeed, please find as much of this information as you can right now and complete the attached “Financial Worksheet” - this will help us work faster and increase our success.