SHORT SALES: FREQUENTLY ASKED QUESTIONS

Q. Can the Seller receive any proceeds from the sale?
A. No, Generally the Lender will not allow the Seller to walk away with any money.

Q. The Seller is current on all home loan payments. Is the Seller eligible for a short sale?
A. Lenders usually will not entertain a Short Sale request if the payments are current, though some exceptions may exist. The seller has
to "reverse qualify", meaning they have to prove they are financially unable to pay the loan.

Q. What fees will the Seller's Lender pay to close the short sale?
A. The Lender will generally pay normal Seller closing costs only. Customary title and escrow fees, pre-approved Real Estate commissions, normal HOA transfer and disclosure fees, documentary costs, taxes and recording fees are usually approved. Additional repair and maintenance costs, delinquent HOA fees, judgments or liens will require specific approval.

Q. Will the Seller be required to pay any money into closing?
A. It is possible the Lender will require the Seller or another party to the transaction to pay fees or costs above what the Lender is willing to absorb.

Q. When will a Short Sale close?
A . Only when all of the following conditions have been met may the sale close: Sellers lender has approved the contract in writing and stipulated an amount for their reduced payoff. Buyer's lender has fully approved the new loan and has funded the loan amount to the escrow in "Good Funds." All requirements listed in the Commitment for Title Insurance have been satisfied or removed. Any additional funds necessary to pay all costs, fees and obligations have been paid into escrow in "Good Funds" by the Buyer, Seller or other applicable party.

Q. How long does the Lender have to approve the Short Sale Contract?
A. There is no limit to how long the Lender may take and there is no way to know in advance how long the approval process may take. Each Lender has its own process. Approval can occur in as little as two weeks, but can take 6 to 12 weeks or more.

Q.Is the Lender required to participate in the Short Sale?
A. No. The Lender has absolute discretion as to its approval of the Short Sale.

Q. Why is the Short Sale contract subject to the Lender's approval when the Buyer and Seller have agreed to the sale?
A. The Seller's Lender is being asked to take less than they are owed in return for releasing their loan. The sales price and costs in the transaction will affect the amount that remains for the loan payoff, so the Lender actually becomes another principal in the transaction.

Q. What happens if the Lender does not approve the Short Sale?
A. Often the Lender will stipulate an amount for loan payoff that they will accept. In that event, the Buyer, Seller and other interested parties may choose to contribute more money in order to make the sale work. If the Lender rejects the Contract outright then the parties can always agree to increase the purchase price and re-submit the offer to the Lender.

Q. When the Lender is reviewing a short Sale Contract for approval, is the Trustee Sale automatically postponed?
A. No. The Trustee Sale can be held on schedule even if there is a contract under consideration.

Q. Is the Buyer still entitled to buy the property under the Short Sale contract once the Trustee Sale is held?
A. No. THe Lender is not bound to the Short Sale Contract if the property is conveyed at Trustee Sale.

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Larry Naso is a Certified Short Sale Negotiator

reprinted from Equity Title Agency Inc.


More Questions? E-mail: lnaso@metrophxhomes.com