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. 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 investors are anxious to buy short sale properties because they can be bargains.

Benefits of Selling a Home With a Short Sale

There are many benefits to selling your house as a short sale. We have outlined a few of the main benefits of selling your house as a short sale. Depending on your own specific situation, the benefits can be significant.

• Working out an arrangement with the lender avoids any legal action by the lender later.
• Often the property value is so far below what is owed, it becomes clear that value may never come back.
• Selling at a short sale helps both homeowners and lenders get a fair price for the property and liquidate a declining asset.
• Avoid foreclosure, stay out of public record filings.
• Possibly avoid bankruptcy.
• Wrap up a bad investment with no loose ends or lingering liability.

Real Estate Agents & Short Sales

If you think a short sale might be right for you, it is critical you work with the right professionals. Real Estate Agents are paid only on short sales that actually close, which can create a terrible conflict of interest if closing the short sale 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 actually makes the homeowner worse off. Only a qualified real estate and short sale attorney can give you legal advice and fully represent your interests.

The Truth About Short Sales

Sellers should be aware, however, that lenders do not always accept short sales and that the process can take longer than a conventional sale. Navigating a short sale is much easier with the assistance of an experienced real estate lawyer.

At My Legal Champion, we help clients undertake and complete short sales. We help them understand why a short sale may be preferable to a foreclosure. Because our founding attorney is also a licensed real estate broker, our law firm is well positioned to guide people through the process.

How an Experienced Lawyer Can Help in a Short Sale

Our attorneys can provide the following services to a client seeking relief from a mortgage that is no longer affordable:

• Listing the home. We work with real estate brokerages around the valley  that focus on negotiating short sales
• Negotiating a sale price acceptable to your lender or lenders, who must approve short sales
• Negotiating with secondary lenders and other stakeholders (holders of second mortgages, tax liens or legal judgments)
• Obtaining an approval letter from the lender or lenders approving the sale

In addition to managing the short sale process, our lawyers will draft hardship letters that lenders require to document the need for a short sale. Hardship letters are some of the proof that lenders like to see, which demonstrate that a borrower lacks the resources to pay the mortgage. We also represent clients in the foreclosure process that may have precipitated the short sale and prepare a package that includes all required documentation, such as pay stubs and other evidence of hardship.

Tax Issues & Short Sales

It is important to talk to your tax advisor, 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. Most short sale sellers can close the transaction without owing any additional taxes, but the deal must be structured right. Again, only an attorney can give you legal advice and fully protect your interests.

What’s the Fee for Short Sale Services?

The fee to represent a client in a short sale can vary. There are Realtors out there who will offer to do a short sale for free, but that’s not who you want representing you. 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.