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Law Office of Marilyn Sullivan

What is a Short Sale? How does a Deed in Lieu Differ?

A real estate short sale is a sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens recorded against the property. In this case, if all lien holders agree to accept less than the amount owed on the debt, a sale of the property can be accomplished. Creditors holding liens against real estate can include primary mortgages, second mortgages, other junior mortgages, home equity lines of credit (HELOC), homeowner association liens, mechanics liens, IRS and State Tax Liens, all of which will need to approve the sale in return for being paid less than the amount they are owed. The lien holders do not have to agree to accept less, but they often do since the alternative is to let the property go to foreclosure in which case they will receive less or nothing at all.

A short sale is a more beneficial alternative to foreclosure for the property owner and creditors and has become commonplace in the United States since the 2008 real estate recession. 

A Deed in Lieu of Foreclosure is a direct transfer of title from you to your lender. This can only be done if you do not have another lien. The lender will not consent to a Deed in Lieu unless the property has been listed with a third party for a reasonable time and it has not sold. Deed in Lieu is part of the government HAFA program and its valuable benefits. Email Marilyn if you want help with a Deed in Lieu.

The HAFA Program has Expired

In 2009 the government implemented the Making Home Affordable Program (MHA) to address the real estate recession and the need to help homeowners deal with their real estate loans. Its primary components are loan modification (Home Affordable Modification Program known as HAMP) and foreclosure alternatives (Home Affordable Foreclosure Alternatives known as HAFA). HAFA provides homeowners the opportunity to exit their homes or rental properties with cash in hand and be relieved of the remaining mortgage debt through a short sale.

These government programs expired on 12/31/2016. That doesn't mean you can't get a loan modification, do a short sale, or take advantage of these programs. Borrowers still need help and lenders do not want to foreclose. The one good thing about the real estate recession is that each lender now has the formula and staff to successfully implement these programs, whereas before the recession these programs were unheard of. Email Mariyn if you are unsure of which direction to go in, or if you have any questions at all. As a specialist in all of the Making Home Affordable Programs, she can help you find your way.

Eligibility for Short Sale

You may be eligible for short sale if you meet the following basic criteria:

 

Benefits of a Short Sale:

Hire a Sale Facilitation Specialist at No Cost to You

A specially trained Short Sale Facilitation Specialist [SSFS] will handle the entire short sale process at no charge to you since the Specialist is paid by the sales commission. As a dual licensed real estate broker and attorney, Mariyn is ideally suited to the SSFS job which she has performed for hundreds of clients nationwide. Her attorney licensing confers the all-important attorney-client privilege which insures that your sensitive financial information is confidential and safe. And, she has the legal clout to shepherd the sale quickly and to overcome legal issues that arise. Marilyn handles the entire process from selecting the property's listing agent to negotiating with your lenders and making sure the tranaction closes.

The Short Sale Facilitation Job

A short sale is a highly complex process that is still a mystery to most.  These are the steps in chronological order:

1.  Obtain a Preliminary Title Report from the title company or closing attorneys, depending upon your state custom. Contact all Lien Holders of record to determine the steps they require to approve the sale.  [Sometimes there are 5 or more including a first loan, a home equity loan, an IRS tax lien, mechanics lien holders, court judgments, HOA liens, etc.] 

2. Request the short sale package from the lien holders. 

3.  Assemble the package of documents to submit to the lien holders consisting of an application, proof of your income, bank account statements, a list of your income, expenses and assets.

4.  Interview Real Estate Agents in the vicinity of your property to determine which would most competently handle the sale listing.

5.  Obtain Comparative Market Analyses of properties for sale and recently sold in your area.

6.  Determine a Listing Price and obtain lienholder approval to the list price.

7.  Hire the real estate agent to list the property and enter into a Listing Agreement, submitted to all Lien Holders.

8.  Initiate showing procedures that strike a balance between the seller's need for privacy and the ability to show the property with few impediments.

9.  Review offers to purchase your home as they are presented. Help choose the one with the best terms and most likely to appeal to the Lien Holders.   

10.  The offer is accepted with a Short Sale Addendum. 

11. Escrow is opened with the title company or attorneys depending on your state's custom. The Estimated Closing Disclosure statement is received from them showing the net proceeds that are available to each Lien Holder.

12. The Closing Disclosure and package of sales documents is faxed to each Lien Holder with a request to approve the sale. 

13.  The Lien Holders will each obtain a confidential valuation of the property.  If the offer meets their valuation, they will strive to approve the sale.  If it does not, they will not approve the sale.  If a Lien Holder’s valuation is unrealistic, evidence must be submitted to the lien holder to dispute the valuation.  How will you know the valuation differs from the offer?  They will counter the sale reject the sale on this basis.

14.  The reason short sales take so long is because it takes constant follow up, meaning at least once a day, to move the transaction through the many different departments of the lien holders. 

15. The second and subsequent lien holders will not approve until all lien holders prior to a lien holder approve of the sale.  Each approval is sent to the subsequent lien holder, and so on.

16.  Negotiation becomes necessary if a lien holder will not accept the funds earmarked for them.

17.  Once all Lien Holder Approvals are received, the Short Sale Condition is released. The Seller then completes their Seller Disclosures while the Buyer begins to satisfy their contingencies: the physical inspection contingency, appraisal contingency, loan contingency, and so on.

18.  In the approval process all Lien Holders agree in writing to waive any deficiency between the amount they are owed and the amount they receive from the sales proceeds (which is often a great disparity). 

19.  The transaction closes.  If the seller or seller’s tenant has been granted a relocation fee, this amount will be disbursed at closing. 

Why a Short Sale Facilitation Specialist (SSFS)

During the real estate recession, Short Sale Facilitation Specialists evolved to take on this multi-faceted challenging job. Prior to the advent of Short Sale Facilitation Specialists, the real estate sales agent was expected to undertake the very arduous job of shepherding the sale through the seller’s lenders’ many different departments in order to obtain sale approval.  Sales agents are sales oriented and not disposed to the more mundane, tedious and time-consuming job of working through the lender’s maize. The result was that a majority of short sales ended up behind the door of Mystery instead of at the Closing Table. 

Enter the professional Short Sale Facilitation Specialist who expertly facilitates the Short Sale process at no additional cost to the seller. In order to best respond to the challenges of short sale, your Short Sale Facilitation Specialist should ideally be a dual licensed attorney and real estate broker, although dual licensing is not required. The real estate licensing qualifies your Specialist to effectively interview agents to handle your sale and monitor the process as it proceeds while legal expertise qualifies the Specialist to effectively negotiate with your lender(s) and address legal aspects of your loan and the sale. Marilyn is a dual licensed SSFS.

Questions/Hiring Marilyn

Email Marilyn or use the Chat Box below if you have questions about the short sale or deed in lieu process or are ready to hire her to facilitate your short sale or deed in lieu. Marilyn handles transactions in any state, not just California, since the short sale process is lender-specific not state-specific. She also consults with some of the large real estate firms when they need an attorney to intervene with a short sale when warranted. Review Marilyn's Testimonials Page to understand the relief clients experience when Marilyn represents them. Each testimonial was provided in writing by a client.

This page was updated March of 2017.


 

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