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Short Sales
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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, handlng 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 runining one's credit. The advantadge 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 paystubs 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 advantadge 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.
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.
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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 advantadge 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 beging with a form that is modified to meet the special circumstances relevant to the short sale. An experiencned short sale attorney should review
the contract. Those that are of particuar 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.
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 -
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 judgement 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 disuss 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? short versus forclose
Personal liability
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