Q. I have been trying to sell my house as I can't afford the payments anymore. My realtor suggested that I do a "Short sale." Will it benefit me?
A. A Short Sale is a sale of real estate where a lender takes less that the amount owed on their note/mortgage and in exchange releases their lien on the property. Anyone can attempt a short sale. However, an attorney usually has better results in dealing with lenders than a person acting for themselves. In completing a short sale, the Seller of the real estate is able to convey the real estate without having the full amount necessary to payoff the liens on the property.
Step one is contact the lender. Call the lender and request the department that handles short sales. Large lenders can have many departments and require many phone calls to locate the proper person. Make sure you get names and phone numbers for follow up and future reference.
Typically the lender knows the market conditions and fair market value of the real estate. You will have to convey your problem, e.g. "It's been it on the market for 6 months and this is the first and only firm offer." The lender may ask you for comparables or a market analysis which you can get from the real estate broker.
Next the lender will want a copy of the contract to know the transaction and to be sure that it is legitimate. It is also possible that the lender will request a copy of the Listing Agreement so that they can be sure there is nothing shady about the commission percentage and relationship with the broker.
The lawyer should prepare a draft closing statement for the lender. The lender will want know - to the closest dollar - the amount of money they can expect from the closing. Too know this your lawyer will have to do a draft closing statement with every known amount (taxes, title fees, attorney fees, tax stamps, etc.) except the lender's payoff figure. The payoff figure should be the NET amount left over. You will not get any of the proceeds.
Most importantly request a Waiver of Deficiency: This is not an automatic. The lender may be happy to give you a short sale depending on the parameters of the market. However, don't assume it's also a waiver of possible deficiency on the loan. You should request it. The lender may require a Financial Statement to substantiate the rationale for a waiver of the deficiency.
If approved, the lender will prepare a letter for the Title Company listing its requirements from the closing. Also, a closing letter with a range of acceptable amounts for the lender is best, though not always something they will agree to do.
Finally, make your contract contingent on lender approval. This protects you as seller from claims by the buyer.
