Managing Broker Richard Symmes is experienced in handling short sale real estate transactions involving distressed property, having negotiated numerous favorable transactions involving loan modifications, deeds in lieu of foreclosure as well as short sales through his law firm Symmes Law Group, PLLC since 2010.
What is a Short Sale?
A Short Sale may be an option for homeowners to avoid a foreclosure sale on their credit if the homeowners owe more than the value of the home and closing costs associated with a normal sale of real estate. In a short sale situation, a homeowner lists their property for sale, receives an offer to purchase the property subject to lender approval and terms are negotiated with the lender(s) to enter into an agreement to sell the home for less than the amount owed to the lender(s).
Depending upon the Short Sale agreement negotiated with the lender, the debt that the homeowner owed on the house is typically considered to be fully satisfied. However, at times, the homeowner may still be responsible for a portion of the deficiency. Additional terms may also be negotiated such as the lender agreeing to compensate real estate brokers and your short sale negotiator as part of the transaction. Every sale and transaction are different and results may vary. With that said, if the purchase and sale transaction does not close, no fees are going to be due to your real estate broker and likely not your short sale negotiator.
How Does the Short Sale Process Work?
- Your short sale real estate broker will meet with you, either at your home or over the phone to discuss your options with your property. You will be asked to provide any relevant details about the home such as any current mortgage balances, if you have suffered a hardship where you cannot make your mortgage payments and what your goals are moving forward.
- Your short sale real estate broker will review your property details and provide you with a market analysis to determine the best price to list your property at. Once you are in agreement on a price, listing documents will be signed, a photographer will come to take pictures and your property will be listed on the MLS and marketed to buyers on your behalf.
- Once a buyer is located and a Short Sale Purchase and Sale Agreement is signed and the parties have determined that they want to bring aboard a short sale negotiator such as Symmes Law Group, PLLC, they will send out intake information including list of documents that may be needed to start negotiating with your lender. The lender may have additional paperwork that you will need to complete along with providing your financial and hardship information detailing why you are unable to pay the full balance that is owed.
- After all the required paperwork is submitted to the lender, the lender will follow up with any additional information that is needed and likely assign an appraiser to check out the property to determine it’s “as-is” value.
- Based on the appraisal, the lender will either accept the proposed purchase and sale price or make a counter offer in which the potential buyer can accept or decline.
- If the buyer agrees to the new purchase price or the prior purchase price was accepted, the lender will provide a settlement agreement which will indicate the terms including whether real estate broker and short sale negotiator fees will be paid as well as whether the deficiency will be forgiven as part of the transaction.
- If all parties are now in agreement, the purchase and sale for the property can proceed to closing.
What are the Pro’s and Cons of Short Selling Real Estate?
While a short sale may not make sense for all real estate transactions, it can be helpful to many home owners who are dealing with distressed property in which more is owed on the property, than the property is worth.
Here are some positive reasons to do a short sale:
- A short sale can avoid a foreclosure sale from reporting on your credit report and allow you to purchase a home sooner than if you went through a foreclosure.
- A Short sale may allow for you to have a deficiency forgiven as part of the bank agreeing to accept less than your full balance owed on your mortgage. This is more important if you have a second mortgage on the property or the property is not your primary residence. This is because in Washington State, a first lien holder cannot collect a deficiency on a first mortgage on a primary residence that has foreclosed, but a second mortgage can.
- Real Broker and short sale negotiator fee’s can be paid by your lender and there are no legal or foreclosure fees incurred.
- A short sale seller can remain in the home while the property is listed and while negotiations with the bank are ongoing. This means that you are likely not making mortgage payments and are able to save money while waiting for an answer on the short sale from your lender.
Here are negative possible consequences of a short sale:
- A Seller May Owe Taxes Related to the Short Sale: Any debts forgiven by a lender may be written off for tax purposes and you may receive a 1099 for the debt forgiven which is treated as taxable income.
- You May Be Liable for Debt That is not Forgiven: While it is our goal to try and make it so the seller is not liable for any debts, post-sale, it’s possible that a lender may require a “Reaffirmation” of the debt. Even if there is no reaffirmation, the residual debt due the lender is not necessarily extinguished by a short sale under Washington State law.
- The mortgage lender or someone they sell or assign their rights to, may demand from you what the lender lost. However, if your residence is foreclosed through a Trustee’s Sale, Washington law extinguishes any right of the foreclosing lender to pursue you for a deficiency. Non foreclosing lenders (such as lenders in second position) may still sue you under the promissory notes in a foreclosure situation as well as a short sale situation.
- Accordingly, signing any reaffirmation agreement may not be in your best interest and you should seek legal counsel prior to signing such agreement for specific advice for your situation. Even if you do not sign any agreement, you need to know that, absent a very clear written confirmation by the lender that you are released of any liability, you should assume that you are not so released from your obligation to pay. We suggest that you consult with an attorney on these matters.
- Credit Score May Be Impacted: It is likely that any foreclosure or short sale will damage your credit rating or credit scores and impair your ability to obtain future credit, mortgages or loans. Credit scores are also used in other industries, and can influence, for example, insurance premiums, security clearances, apartment rentals, and job screenings. Paying your loan timely and staying current will likely positively affect your future credit.
- Profits: If this is a short sale, in almost all situations, the lender requires that a seller not receive any money from the sale. It is also possible that the parties have to bring money to escrow to facilitate the short sale. If anyone is promising you money in a “side agreement” or a deal not disclosed to the lender, such agreement may be fraudulent. Please inform your attorney of any side deals from a buyer and seek the advice of an attorney as such arrangements are possibly invalid and/or unenforceable and could subject you to civil and criminal proceedings and penalties.
- The Bank has the Final Say: In order for a short sale to be approved, all parties must be able to convince the bank or banks if there are multiple liens on the property to accept less than the full balance owed. If they do not, then the sale cannot be completed.
How Do I Get Started with Short having Richard Symmes list my property as a short sale?
If you are ready to get started with the Short Sale process please contact Richard Symmes at 206-326-1858 or fill out the contact form on this website and somebody will be in touch with you shortly. The biggest mistake we see homeowners make is to wait too long after determining that short sale is the best option.
The longer a seller waits, the more interest accrues and the closer a possible foreclosure auction date becomes. It can take several months to get a short sale approved, so the more time the better, otherwise filing a Chapter 13 bankruptcy could delay a foreclosure if the bank is not willing to extend out the foreclosure date. To avoid complications in a short sale transaction, sellers should take action as soon as possible