Answers To Questions We Are Frequently Asked About Short Sales
Here are brief answers to some of the questions we are often asked. These answers are meant to provide information, not legal advice. For legal advice, speak with an attorney.
Can a short sale be completed between family members or friends?
Not under most circumstances. All lenders have an arm’s length transaction requirement where the buyer cannot be related to the seller, be a business associate or be a close, personal friend. There also cannot be any side agreements between the buyer and seller regarding money, purchase of personal property, rental agreements or future options to purchase. Most lenders have the parties sign affidavits or certification documents to that effect. Speak with one of the North Carolina short sale lawyers at Wilde Law Firm today to confirm your short sale is an arm’s length transaction.
Why should we hire Wilde Law Firm to handle our short sale?
Wilde Law Firm and its attorneys exclusively practice short sales law. The office is dedicated to successful short sales and helping real estate agents, buyers and sellers. Put our experience with short sales to work for you. “Let us do what we do best…short sales…so you are free to do what you do best…sell real estate.”
What are the key benefits of hiring Wilde Law Firm?
Wilde Law Firm will:
- Ensure the complete understanding for the Seller, Buyer and agents of the Short Sale Process
- Provide organized timely assistance for the collection of all required documentation
- Arrange for submission of a complete document package that meets the lender’s specification and requirements
- Facilitate with the lender on terms of the short sale, including the deficiencies. Our firm negotiates with the lender for favorable terms of the short sale, including those concerning the deficiencies.
- Continuously manage of the file/transaction through the lender’s process, with oversight of the broker price opinion (BPO) or appraisal
- Communicate regularly with the lender and all parties involved so your file is not lost at the bottom of a pile
- Coordinate with the closing attorney and lenders through closing
What is the cost to the home seller?
The Wilde Law Firm will attempt to have the attorneys’ fees paid by the lender and through closing cost credits with the buyer. We are very successful in having the lender pay at least our minimum fee most of the time. Finally, Wilde Law Firm does not receive any fee unless the property closes, and we do not collect any upfront fees if fees are handled this way.
What is the cost to the home buyer?
The buyer is not responsible for our fee out of pocket except in rare instances where the seller is unable to pay the minimum fee. This instance would be known to the buyer prior to submitting an offer.
How does the real estate agent get paid in a short sale transaction?
The real estate commission is paid by the lender or loan servicer from the proceeds of the transaction. They almost always agree to a 6% commission.
How can Wilde Law Firm handle our short sale in Charlotte, Raleigh, the Outer Banks or another State if they are located in Asheville, NC?
First, Wilde Law Firm conducts all of our client consultation via the phone or Zoom so our location is not an issue. Second, we are not the closing attorney, that will be handled by a local closing attorney chosen by the buyer. Third, the lenders and loan servicer that we work with to complete the short sale are usually out of state so again, our actual location is irrelevant.
Can Wilde Law Firm facilitate short sale is other States?
Yes. A short sale facilitation for a property in North Carolina is identical to a short sale facilitation for a property in any other state.
I already have a settlement attorney. Can’t they handle the short sale?
It is usually best to have Wilde Law Firm handle the short sale and you’re your closing attorney conduct the closing. Most settlement attorneys do not have the experience, time or staff to facilitate short sales. If they do agree to facilitate the short sale, it is usually on an hourly fee or with a predetermined fee. If Wilde Law Firm facilitates the short sale, our experienced staff manages the transaction in a friendly, competent and professional manner, with fees typically paid by the lender. There is no upfront cost to the seller and no cost if the property does not close.
Wilde Law Firm will not be the closing attorney as our function is only to facilitate and negotiate the short sale. The good news is that buyer can still use the closing attorney that they are familiar and comfortable with once we obtain the short sale approval.
How many attorneys are there in this transaction?
We feel that the absolute best model to manage any short sale transaction is with three attorneys; Wilde Law Firm will handle the short sale and represent both parties in the short sale negotiation portion of the transaction. Once we have a short sale approval letter in hand, we will work closely with two closing attorneys all the way through the closing. The buyer’s closing attorney will manage the closing and the seller’s closing attorney will advise the seller and prepare the seller docs for closing.
Can the buyer’s closing attorney also prepare the seller docs?
This is not advisable. Always, always, always have two separate closing attorneys in a short sale transaction. The reason is simple; liability. The buyer’s closing attorney represents the buyer exclusively. If the buyer’s closing attorney prepares the seller docs he is usually doing it as a favor and a small fee but is not representing the seller. The seller is losing a home and may have future financial obligation to the lender, as well as tax liabilities if debt is forgiven. The seller, therefore, requires separate qualified representation and advise at the closing.
When Wilde Law Firm handles a short sale in North Carolina, we recommend Kevin May of Graves May, PLLC, as the seller’s closing attorney. Not only is he one of the most experienced seller-side closing attorneys in a short sale, but, is also a tax attorney and will have a tax consultation with the seller regarding the pending 1099c and any tax ramifications.
We make sure that all aspects of the short sale are handled properly so the seller is fully informed with the most up-to-date information and no issues come back to the agents at a later date.
If I can’t sell the house for the loan amount, what happens to the balance?
For example, I might owe $250,000, but I can’t get an offer for more than $220,000.
In this example, the deficiency will probably be around $50,000 after the lender or loan servicer pays 6% real estate commission, taxes, tax stamps and maybe some closing costs. The lender has several options for handling the $50,000 deficiency balance owed:
- Forgiveness of debt: The lender may agree to terms under which they write off the loan, and the homeowner will not be asked to repay any of the deficiency. However, when the lender forgives the debt, the lender must send Form 1099c to the homeowner to pay income tax on the deficient amount. (The seller may not be required to pay if the homeowner is insolvent at the time of the short sale.)
- Unsecured note – The lender may require that the homeowner sign a promissory note for all or part of the deficiency under negotiated terms.
- Cash contribution – The lender may require a cash contribution from the homeowner at closing for part of the deficiency.
- Deficiency judgment – The lender may preserve the right to pursue a deficiency judgment at a later date. The lender could choose to file suit against the seller for a judgment in their favor of all or part of the deficiency and could file liens or seek other means to recover all or part of the deficiency.
Who actually determines the facilitated price Do you use a separate BPO, appraiser or both
In the short sale process, the lender will order a broker price opinion (BPO) or an appraisal to determine the present market value of the property for their negotiating purposes. The lender will review the short sale offer in relation to this valuation.
What price is the lender looking for in order to approve a short sale?
All lenders require a ‘market price’ offer within the sold comp range for the subject property. In a short sale, the price established by the lender is usually at the lower end of the sold comp range. The mistake most inexperienced people make is submitting an offer well below this range thinking that since it is a short sale the lender will take any offer. This is incorrect. They are submitting an offer that the lender or the loan service cannot approve so the only thing that they will end up with is months of wasted time and a story to tell about how short sales suck. Short sales don’t suck. Short sales rock! They are a wonderful workout option for most sellers who find themselves owing more than the property is worth.
Contact Us Today For Trusted Short Sales Advocacy
At Wilde Law Firm, our focus is short sales. Our team can step in at any point of a short sale process to help our clients successfully navigate through the process. Email us or call us at 888-615-1443 to learn more.