Short Sale

Florida Foreclosure Lawyer

A short sale in real estate occurs when the outstanding obligations (loans) against a property are greater than what the property can be sold for. Short sales are a way for homeowners to avoid foreclosure on their homes and still be able to pay off their loan by settling with your lenders.

Do I need to hire an attorney?  Falling behind on your mortgage payments and trying to come up with a solution to the problem can be an extremely stressful.  Therefore, in many circumstances, it makes sense to consult with an attorney about you property and the potential solutions that are available to you, including a short sale.  While it is certainly not a requirement to have a St. Petersburg foreclosure defense lawyer, it is wise to consult with one.  The attorneys at Leavengood & Nash understand not only short sales, but all of the potential solutions available to you and which may best serve you.  We therefore recommend that you contact an attorney to assist you.

Value of Property.  First, you must determine the value of your property. If you are selling the property through a real estate broker, your broker will help provide you with an estimate of your home’s market value. If you are selling the property yourself, do your own market analysis of the area (i.e., comparable sales on comparable homes) and your property.

Estimate Closing Costs.  Next, you will need to estimate your closing costs by adding up all the costs of selling the property. If you are using the services of a real estate broker, the broker will provide an estimate of closing costs. If you are selling the property on your own, call a local title company or real estate attorney and ask, as a seller, what the closing costs will be.

Lien Balance(s).  Determine the amount owed against the property. This will be the total of all loans against the property. This my be best be accomplished by locating the outstanding balance of each loan on a recent statement.  It should be noted that some loans will have pre-payment penalties which could increase the balance outstanding if sold prior to a certain date.  Additionally, if you have been past due on any of your loan payments, the lender likely has the contractual right to charge late fees and, if delinquent enough, attorneys’ fees and costs to enforce their rights.

Calculate the Deficiency.  Do the calculations. Subtract the total amount owing against the property from the estimated proceeds of the sale. On a short sale, this will be a negative number, called “the deficiency.”

Contact Lenders.  At this point, it is time to contact your lenders and speak to someone in their “loss mitigation” department or their customer service department and tell them the situation and your desire to engage into a short sale. They may direct you to another department or individual to assists in these situations. Talk to a supervisor or manager if possible; this person will have more authority.

Specific Requirements.  Ask the lender what its procedures are for a short sale. Some lenders are willing to work with you by reducing the amount owed or making other arrangements. Others will look to the agents involved (if any) or anyone else who's making money off the transaction to see if they are willing to make concessions to make the transaction happen. Still other lenders will tell you that your debt is your responsibility, one way or the other. Generally speaking, lenders require the following:

• Hardship Letter
• Income & Expenses (last two months)
• Listing Agreement (typically six months)
• Listing Price & History
• Broker contact Information
• Offer
• Proposed HUD-1 Statements

These again are documents that the lender typically requires before considering a short sale.  The list and supporting documents will vary from lender to lender.

Sell the Property.  Assuming that you have been able to gather everything required for the short sale, now you only have left to do one thing:  Sell the property!

Tips & Warnings.  Below are several tips and warnings you should consider before you enter into a short sale arrangement. 

• Closing costs will include title and escrow fees (if the seller is responsible for any portion of them, which will depend on your county), attorney fees, a portion of unpaid property taxes, re-conveyance fees, notary fees, delivery fees, documentary fees and/or transfer fees.
  
  
• If you sell the property without the assistance of a real estate broker, you will save the amount of the commission and have more to apply toward paying off your loan.
  
  
• If you feel more secure having a real estate broker handle the transaction, consider using a discount broker to market your property. You could also try to negotiate the sales commission with your broker.
  
  
• Remember that the amount on your monthly loan statement does not include accrued interest. Interest is accrued until the date a loan is paid off, so you may have as much as 30 days of interest on top of the balance owing, and you'll need to include this interest in the total payoff amount.
  
  
• If a property is sold under a short sale, the lender may require the buyer to make up the difference, either through a personal obligation or a collection.
  
  
• The IRS often gets involved with short sales, because they are seen as a relief of debt and may be treated as income. Please consult with your with your accountant or tax advisor for specific details. 

NOTE:  On December 20, 2007, President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007, which will help Americans avoid foreclosure by protecting families from higher taxes typically assessed from the forgiveness of indebtedness.   This Act will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive.  Under current law, if the value of your house declines, and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as income that can be taxed.  

BENEFIT:  This Act will increase the incentive for borrowers and lenders to work together to refinance loans and allow American families to secure lower mortgage payments without facing higher taxes.    

Contact a St. Petersburg foreclosure defense attorney about your legal matter today!