Short Sales

What is a Short Sale?

A short sale is the sale of real estate where the owner owes more to the bank than the property is worth. Florida homeowners who are experiencing a financial hardship often turn to a short sale to avoid foreclosure or bankruptcy. On the other end of the spectrum many buyers are anxious to buy short sale properties because they can be bargains.

Much Ado About Short Sales

Bookstores are now full of books about “buying a short sale at discounted prices.” Many websites promise bargains on short sale homes, or promote “foreclosure lists” for a reasonable fee. In reality, there are good buys on short sale homes, but there is also a high price to pay; the process of locating, buying a short sale, and working through the legal and emotional complications is not for everyone.

Benefits of Selling a Home With a Short Sale

There are many benefits to selling your house as a short sale. Depending on your own specific situation, the benefits can include:

• Working out an arrangement with the bank avoids any legal action by the bank later.
• Many times the property value is so far below the mortgage, it becomes clear that value will never recover.
• Selling at a short sale helps both homeowners and lenders get a fair price for the property and eliminate a declining asset.
• Avoid foreclosure, stay out of public record filings.
• Possibly avoid bankruptcy.
• Wrap up a bad investment with no loose ends or lasting liability.

Benefits Of Buying a Short Sale

Many buyers assume that the very status of a property as a “short sale” makes it a bargain, this is simply not true. The benefits of short sale for a buyer are determined by the particular transaction, not some formula that works for everyone. Many short sales can be good investments, others are bad investments which will only get worse.

If you are interested in buying a short sale home, it could prove to be a lucrative and rewarding experience. This is especially true when you hire a professional to make sure that you avoid making the common mistakes that many investors make. Siegel Siegel & Wright can assist you with every aspect of buying a short sale house.

Remember…

• A short sale usually means that the home has decreased in value since the last sale, and may be in a declining market.
• Short sale homes are sold “as is” without any representations or warranties from the lender; get a thorough inspection.
• It takes much longer to close a short sale transaction because the bank must approve all aspects of the deal.

When buying a short sale, be aware that lenders typically refuse to pay for common items such as:

• Suggested repairs found during a home inspection
• Pest control (even if it is determined the home has insect problems)
• Roof repairs
• Home protection plans
• Deferred maintenance

Real Estate Agents & Short Sales

If you think a short sale purchase or sale might be right for you, work with the right professionals. Real Estate Agents are paid only on a short sale that actually closes, which can create a terrible conflict of interest if closing the short sale transaction would not be in the homeowner’s best interest. Frequently, lenders ask homeowners to sign a promissory note or specifically agree to liability after the transaction closes. Closing a short sale on these terms can actually put the homeowner in a worse situation. Only a qualified real estate and short sale attorney can give you legal advice and fully represent your interests.

Tax Issues & Short Sales

It is important to talk to your tax advisor, tax attorney, or work with a short sale attorney, before selling your property due to potential tax repercussions. The IRS considers the difference between the value at which you sell your house, and the balance on the mortgage as “income,” unless directed otherwise. Many short sales can currently close the transaction without owing additional taxes, but the transaction must be structured correctly. Again, only a qualified attorney can give you legal advice and fully protect your interests.

Short Sale F.A.Q.s

Q. Why do you do short sale law?

A. There are many consumers in distress and many people who need help; this practice area is in great demand. Many borrowers are people who initiated loans through subprime lenders. Now, many people don’t have equity they were hoping for, and can’t refinance. Often the best solution for these borrowers is a short sale to stop foreclosure.

Q. What’s The Advantage Of A Short Sale?

A. A short sale is when the borrower can’t make mortgage payments, and the bank allows the property to be sold at a loss instead of going all the way through a foreclosure. With a short sale, often the consumer doesn’t have a foreclosure or a deficiency judgment. The consumer hopefully can walk away without damaging his credit too much.

Q. Why Would They Hire An Attorney?

A. Frequently, when the borrower doesn’t have equity in their home, there’s not a lot to fight over. We’re only talking about some potentially unlawful fees and damages. But it’s not as easy as it seems to do a short sale. You need your documents presented properly and you need to get them together fast. If it’s not done right, the bank will move you through to foreclosure.

Q. How Much Does It Cost A Client?

A. The fee to represent a client in a short sale can vary. Some Realtors will offer to do a short sale for free, but that’s not who you want representing you. Some Realtors just want to “take a shot” at putting the deal together with no legal background or ability to address issues that often arise, such as allegations by the bank of mortgage fraud or other lending issues.

Buying or Selling a Short Sale? Hire a Lawyer!

Whether you are selling your house as a short sale, or you are interested in buying a short sale home, Siegel Siegel & Wright can meet all of your needs. We want to make your short sale process a success, and protect you from the complications that can arise with short sales. We offer free consultations so there is no obligation to you.