There’s a lot of mystery involved in the short sale process. First, a short sale is when a lender allows a borrower to sell their home for less than the amount owed on a mortgage. A short sale is sought by borrowers who want to get rid of a mortgage obligation without harming their credit with the impact that a foreclosure would have.
The first step in the short sale process is to list the home for sale with a Realtor experienced in short sales. The Realtor will be able to conduct a Comparative Market Analysis (CMA) to determine the fair market value of the home and list the home for sale. Before the short sale process can begin, the borrower will need to receive an offer on the property and enter into an Agreement of Sale with a buyer.
Once an Agreement of Sale is signed by the buyer and seller, the Agreement of Sale must be approved by the lender. Our law firm can help borrowers and Realtors get short sales approved since we are experienced in the short sale approval process. We know what lenders need to review and we follow up at the right times to get the deal approved. Working with an attorney on the approval of a short sale is critical because most borrowers who are looking for the approval of a short sale are also in default, allowing the lender to proceed with a foreclosure action at any time.
Once a foreclosure action is filed in court, “short sale negotiators” or “real estate investors” cannot take any action to help fight your case in court. Only an attorney will be able to defend against a foreclosure action that’s filed in court which gives you a tremendous advantage in the short sale negotiation process. Lenders know that they’ll either be able to accept the short sale and receive income from the property immediately or they’ll have to spend thousands of dollars to obtain the home at a sheriff’s sale which may not even occur until months or sometimes years later if the borrower is represented by an attorney.
Once an Agreement of Sale is entered into and the bank has all of the documentation they need to approve the transaction, next is the approval from the investor. For conventional mortgages, the lender that is servicing your loan (collecting mortgage payments) is most likely not the owner of your mortgage. The owner of your mortgage is most likely an investment trust that has bought mortgage-backed securities. Before a short sale can be approved, your lender must obtain the permission of the investor to approve the transaction.
At this stage of the process, the investor will conduct a financial analysis to determine what is in the best interest of his beneficiaries: approving the short sale or obtaining the home at a sheriff’s sale. If it makes financial sense for the investor to approve the short sale, you’ll likely receive approval of the short sale. However, if the investor believes it would make more financial sense to obtain the property at a sheriff’s sale and then resell the property themselves, then the investor may want to reject the short sale approval request. In most circumstances, it makes more sense for the investor to sell the home as a short sale because substantial costs are required to take back possession of the home. The investor will have to hire a law firm to file a foreclosure action. The investor will then have to purchase the property at a sheriff’s sale. The investor will then have to pay property taxes, maintain the premises, and winterize the home while it remains vacant and listed for sale. The costs involved in all of this are substantial which is why shorts often get approved under the right circumstances.
The key to a short sale approval is presenting an offer that is reasonably within the current fair market value, regardless of what the original loan obligation is, as well as working the right partners to get the transaction approved.
If you’re looking for an attorney to represent you throughout the short sale process, please call us a (610) 417-6345 for a free consultation. We’ll be happy to answer any questions you may have about the process. We are foreclosure defense attorneys located in Bethlehem, Pennsylvania.
Zachary Zawarski, Esq.