Whether you should hire a lawyer ultimately depends on your personal circumstances. In the end, even if you decide not to hire a lawyer to facilitate your short sale, it could be worthwhile to pay for a consultation with a qualified attorney who can answer any questions you have on this topic.
Short sales can be tricky, so be sure your attorney is familiar with how they work. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising.
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Grow Your Legal Practice. Meet the Editors. Common Short Sale Problems and Obstacles. Learn about common short sale obstacles and how a lawyer might be helpful in the process. What Is a Short Sale? Common Problems and Obstacles With Short Sales If you're aware of the most common short sale problems, you'll be better prepared to deal with them as they come up. Getting the Lender to Agree to a Short Sale The first task in getting a short sale is to convince your lender to agree to release its mortgage lien in exchange for receiving the proceeds from the sale.
What Happens to the Deficiency? Documentation Must Be Correct and Complete One common reason that short sales fail to close is problems with the documentation. Should You Hire a Lawyer? Talk to a Lawyer Start here to find foreclosure lawyers near you. Practice Area Please select Zip Code.
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You have money questions. In some states, even after a short sale, the bank will expect you to pay back all or part of that shortfall. These may include bank statements , medical bills, pay stubs, a termination notice from your former job, or a divorce decree.
It is up to you to come up with a proposal. Be aware that the lender ultimately must approve a short sale after receiving all the details because the lender is the recipient of the proceeds.
Your job is to find a buyer for your home. Along with the documentation of your distressed financial status, your proposal should include a hardship letter explaining the circumstances that are preventing you from making your mortgage payments.
You want to make it as convincing as possible and protect your interests while also appealing to the bank. Be careful about submitting your financial information to a lender because, if it does not approve the short sale, it may use your financial information to try to get money out of you in foreclosure proceedings. If you still have cash assets , you may be expected to use them to continue making mortgage payments or to make up some of the shortfalls between the sale price and the mortgage amount.
An attorney experienced in completing short sales can help you navigate the details. Because short sales can take longer than regular home sales due to the need for lender approval, they often fall through. The buyer may find another property while waiting for an answer from you. Be prepared for this possibility. If the short-sale transaction goes through, consult with the Internal Revenue Service IRS to see if you will have to pay taxes on the shortfall.
Also, be aware that a short sale can still affect your credit score in the sense that the months of mortgage payments you missed prior to the short sale can show up as delinquent payments on your credit report. Your bank may be more likely to be generous in this regard if you brought up your hardship before you were significantly behind. For credit purposes, while this is somewhat damaging, it is certainly less damaging than a foreclosure.
Short sales can also provide excellent opportunities for buyers to get into houses at a reduced price. Here are a couple of tips to help you make smart decisions when considering the purchase of a short-sale property. Most short-sale properties are listed by real estate agents and on real estate websites. Some listings may not be advertised as short sales, so you might have to look for clues within the listing, such as being subject to bank approval or giving the bank time to respond.
An experienced real estate agent can make a big difference in terms of both finding and closing short-sale properties. Holders of this certification have received specialized training in short sales and foreclosures, qualifying sellers for short sales, negotiating with lenders, and protecting buyers. Realize in advance that short sales are complicated, time-consuming transactions. It can take weeks or months for a lender to approve a short sale and many buyers who submit an offer end up canceling because the short-sale process takes too long.
Rules for short-sale transactions vary from state to state, but the steps normally include:. If you are buying a house in a short sale with the intention of flipping it, the key to a profitable transaction is a good purchase price. In real estate investing , it is said that the money is made in the buy.
This means that a good purchase price is often the key to a successful deal. If you can get a property for a good price, you increase the odds of coming out ahead when it comes time to sell. You should be able to buy the property, put it in great condition, and sell it at a price where you can still make a profit. Investors need to be able to turn around and sell the house quickly—typically at below-market—and a good purchase price makes this possible.
The purchase price is only one important number, however. Costs to consider include material, labor, permits, inspection fees, trash removal, storage costs, and dumpster rentals. A good inspection before making the purchase can alert you to any large expenses, such as a cracked foundation, faulty wiring, or extensive termite damage.
Investors look at this number to determine whether a property has profit potential. These are homes that have recently sold in the area typically up to a mile away from the subject property that have similar features in terms of square footage, such as the number of bedrooms and bathrooms.
Carrying costs are your expenses for holding onto the property. The longer you own the property, the more you will spend on carrying costs, which include:. In order for an investment to be profitable, the sum of your costs the purchase price, repair and renovation costs, and carrying costs must be lower than the ARV. If your costs are close to or higher than the ARV, it will be difficult or impossible to make a profit.
You can determine the potential profit by subtracting the purchase price, repair and renovation costs, and carrying costs from the ARV:. Under these guidelines, total investment purchase price, repair and renovation costs, and carrying costs should not exceed:. The various investment levels are used to reduce risk in changing market conditions. You can risk more in a rising market because you are more likely to get your ARV or better when you sell.
In a falling market, you are less likely to get your ARV, so your investment should be smaller. In real estate, a short sale takes place when an owner sells their house below its mortgage value.
This typically happens when the owner is under financial distress and is behind on mortgage payments. In the first quarter of , distressed sales accounted for These are different from conventional sales and need to be undertaken with caution. Distressed sales often involve homes needing repairs. When a property has one lien against it, buyers should work with real estate agents to check for any other potential problems. If the house is still the one they want, the purchase can go through, but it will be harder.
There are also cases where liens were put on a property but the sale is not forced. Read on to learn more. Liens are part of the public record. There are two main types of liens : Voluntary liens and involuntary liens. Voluntary liens were agreed to by the property owner and include a first mortgage, a second mortgage taken to help purchase the property, or a home equity loan or home equity line of credit to undertake home additions.
The order in which liens are paid off is generally a matter of its recording date, which means mortgage liens come first. Creditors have the right to request a property be sold to pay off a lien, usually by a foreclosure sale. Instead of foreclosing on a lien, creditors wait until a property is sold to try to recoup their money. Lenders will not give a loan for a property with a tax lien from the state or federal government because these liens take priority and must be paid off before a mortgage.
This first position means the bank is at a higher risk of not getting paid back for the loan after the sale of the house.
As part of the home buying process, your lender will require a title search on the property you want to buy.
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