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We represent both sellers and buyers in real estate short sales and handle matters in Camden, Burlington, Gloucester and
Mercer Counties.
For short sellers, our fees are totally paid by your bank and we handle all of the paperwork, document preparation and submission on your behalf. Most
importantly, our short sale experience allows us to negotiate the transaction on your behalf with the bank and handle any unforeseen contingencies, keep up to date on
deadlines, etc. to ensure your sale is approved and your closing takes place. For those buying a short sale listing, we offer flat fee pricing that does not escalate based
on the length of time or involvement in obtaining the short sale approval.
Whether you are a buyer or seller, our services include a detailed review of your contract and consultation with an attorney to review all of the particulars
of your transaction and your circumstances. The attorney will work with you throughout the entire process, handling negotiations with the lender (for sellers), status
updates, title work, up to and including being present with you at closing to deal with any last minute issues.
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What is a Short Sale?
In a short sale, the seller's mortgage holder (lender) agrees to release their lien (mortgage) on the property for less than the amount
owed on the loan, or loans. (Many short sale properties involve both first and second lenders). The property can proceed to a closing and sale rather than a foreclosure
taking place and ruining one's credit. The advantage to the lenders are that, while they take less up front, they save long-term expenses forced by having to go
foreclosure such as legal fees, court costs, sheriff sale fees, etc.
Further, short sale sellers can never have any net cash to them at closing and all monies that would otherwise go to the sellers as a result of the sale are submitted to
the lender(s) towards the loan balance/approved minimum payoff.
 What Documents Typically Need to be Submitted by the
Seller to the Lender for Approval?
While each bank may have its own individual requirements, there are several common requirements one can begin to prepare as the time to
submit short sale paperwork (typically, after a contract is signed with a buyer) approaches. These include, but may not be limited to, copies of the following:
- Last two years tax returns
- Most recent two pay stubs for any owner
- Hardship letter (drafter by the sellers to the bank explaining why they need a short sale and requesting help).
- Last two months bank statements (checking and savings).
Buyers of short sale properties will have to take the normal steps to purchasing a property such as mortgage and title insurance. In
addition, short sale lenders will also typically require the buyer to execute several common documents in final preparation for approval/closing:
- Certification the buyers have no interest in, and are not employees of, the short-selling lender
- Generic authorizations and/or title/mortgage information sheets.
Who pays the legal fees and/or commissions for a short sale transaction?
For sellers, the entire legal fee is
negotiated with and paid by the lender at no added expense to sellers. Similarly, real estate commissions are completely covered, and sometimes negotiated with, the
lender(s) in their review and approval of the final short sale.
As with any other transaction, buyers bear their own legal costs. With our firm, buyers can take advantage of flat-fee pricing with no money due until the
actual settlement happens, where the fees are paid as part of the settlement on the HUD-1 Sheet.
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Sellers can help the short sale process by visiting their lender(s') website and
start gathering the specific documents and/or forms that may be required by each lender as well as checklists or steps for the process with that individual lender. Some
lenders have online application processes that can be started simultaneously to our firm beginning work on your file.
Timing
One of the most frustrating part of the short sale for all involved is the timing and waiting for word/status from the
lender(s). In many instances, the process takes 2-3 months just to get an approval and another month for closing, and these periods can often be extended.
Unfortunately, with
most companies, until direct contact has been established by our firm, it can often take 20-30 minutes per call just to get information and several days or weeks for any type of
reply to questions or submitted documents. For sellers, the advantage to waiting out the process it the successful approval and closing of the short sale, which saves further damage to one's
credit. For buyers, they should be aware of the nature of this process going into a contract and the ultimate wait must be measured against the significant savings the buyer is
obtaining through the short sale purchase.
What are Common Short Sale Issues/Conditions in the Sale Contract?
Like most other transactions, short
sale contracts typically beginning with a form that is modified to meet the special circumstances relevant to the short sale. An experienced short sale attorney should review
the contract. Those that are of particular interest in a short sale transaction include:
AS-IS/No repairs by seller - This is imperative from the view of the short seller and lender because there is no method to account for additional
funds/re-negotiation based upon repairs. It is also important since most short sellers are not still in a financial position to be able to afford repairs to the
property.
Duties of Buyer and Seller - While the contract typically sets forth the duties of each party, such as inspections within a certain time period,
obtaining Certificate of Occupancy, etc., in short sales, some of the typical roles are re-defined/re-assigned. For example, while in a normal transaction, the seller would obtain
the Certificate of Occupancy and Smoke Detector Certification, these typically fall on the buyer in a short sale transaction.
Approval Deadline - for the benefit of all parties, a date is typically established whereby either party may cancel if the short sale
approval has still not been obtained. The recommended timeline is to allow ninety ("90") days from the end of the three day attorney review period
to obtain approval from the short sale lender.
ROFR (Right of First Refusal) - Since the goal of both the seller and lender is to maximize the amount they can pay towards the outstanding mortgage balance(s),
it is common that a right of first refusal clause be inserted that permits alternate offers to be entertained until loan approval, with the buyers having a chance to match said offer within
a certain time period. (Typically, 48-72 hours).
What are the Legal and Tax Implications for a Short-Sale Seller?
The immediate legal impact on the seller is that the mortgage lien(s) are released permitting the seller to transfer the property to the buyer. A potential longer term legal
impact is that the lender may ask the seller to sign a personal note, or pursue a deficiency judgment against the seller for the remainder of the mortgage due after
applying short sale proceeds. (Although such deficiency suits/judgments are not commonly pursued, and there are potential defenses, it is an issue to consider and speak with
your attorney about).
Tax consequences for the seller can include the requirement to pay income taxes under a 1099-C issued by the lender for the amount forgiven. While recent federal law
forgives this "income" under many circumstances, we again point out this issue as one to consider and discuss with your attorney. (We also recommend discussing this important
issue with your accountant/C.P.A. in conjunction with your legal consultation).
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What if My Home is Already in Foreclosure?
Do not panic. While receiving a Notice of Intent to Foreclose or actual foreclosure papers can be a scary experience, it does not mean it is too late to attempt a short sale.
In a foreclosure, you will receive notice of the initial suit against you, giving you 35 days to answer before the plaintiff
can move to default against you if you did not answer. That takes an additional 60 days at a minimum and then scheduling/setting
up an actual foreclosure sale takes an average of 5-6 months for most of the Counties where we practice. Hence, there is usually still plenty
of time once these procedures have begun. Be sure to provide us with all copies of any such correspondence or legal papers received so that we may discuss whether or not
you want to file an answer, and, either way, so we can advise the foreclosing attorneys of the status of your pending short sale.
Saving the home from foreclosure by cooperating in the short sale proves to the lender that you are taking some steps to mitigate their losses
and to other creditors that you did not just walk out and force the bank to sue and foreclose. Further, it has been reported that foreclosure is a very bad credit
item, similar to bankruptcy, or repossession, while short sale will not result in as big of a hit to the credit score or overall credit-worthiness.
Personal liability
In some instances, a lender may ask for the borrower (seller) to sign a personal note, or refuse to release personal
liability on the note held by the lender for the amount owed after the short sale payoff. Alternatively, a lender may retain the right to later seek a Deficiency Judgment against
the seller for the remaining balance. Pursuit of these claims by lenders remains rare at this point and there are numerous potential defenses to such claims. In light of the advantages
of a short sale and the rare pursuit of these claims, it is not a significant issue for most sellers. If you have further questions or concerns about this specific issue, you should discuss
that with your attorney and be sure that the issue is addresses and/or negotiated with the lender as part of the approval process.
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