SHORT SALES afc law
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:
OWNER/SELLERS: If you are a person in danger of losing your home and are trying to understand what your rights or options are this option means you have made studied every other option and have decided that it is better cut your potential liability by selling the house than having the bank foreclose on property and damage your credit even more.
BUYERS: Whether you are a person looking for a new home or an investor looking for an opportunity to buy for less, the short sale can be an alternative to REO's or regular sales. Beware, however that, short sales can 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 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.
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.
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? 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. In some cases we can negotiate a cash for key arrangement but this will depend on the lender and there is no obligation for them to offer or accept this option.
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.
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. While this is still mostly true, there are exception and if this is your homestead, you may be allowed to receive "cash for keys." Cash for keys means they will allow you as the owner to receive enough money from the sale to pay for your moving expenses under very limited and strict conditions.
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.
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 OF A SHORT SALE: 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.
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.
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.
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.
DISADVANTAGES OF A SHORT SALE: 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.
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 “Financial Worksheet” - this will we will provide to you to help us work faster and increase the chances of your success.