SHORT SALES: FREQUENTLY ASKED QUESTIONS, continued

Q. How can I get the Lender to approve the short sale contract?
A. There is no way to pressure the Lender into approval, however, by knowing exactly what the lender requires and making a complete and timely submission of all of the Lender's requirements, you greatly improve your chances.

Q. When should I contact the Lender about a potential Short Sale?
A. When, or even before, the property is listed for sale, the Seller or Seller's Agent should contact the Lender's Loss Mitigation Dept and request a "Short Sale Package," or a list of all of the Lender's Short Sale Requirements. Some Lenders require that a contract be in place before they will send a package, but the earlier the contact, the better.

Q. What happens when the Seller's Lender has approved the contract?
A. Once a written approval has been obtained from the Seller's Lender, they will usually stipulate a time by which the escrow must close. The Buyer should be ready to close as soon as possible. This means that Buyer's Lender will need to expedite the new loan processing, appraisal and approval. Buyer should expedite all necessary inspections and arrange to have good funds needed to close.

Q. What happens if the Buyer can't close within the time frame stipulated by the Seller's Lender?
A. If the escrow has not closed in time to satisfy Seller's Lender then a new written authorization to close will be required. Since the Lender's time requirement is often based upon the net loan proceeds they will receive, it is often necessary for the Lender to obtain new approval for any additional costs incurred by the delay. This approval can take time and is not automatic.

Q. The property has a 1st loan and a 2nd loan. What does that mean in a Short Sale?
A . Both loans will need to be released, therefore both lenders need to approve the Short Sale.

Q. The Seller's Lender is requiring the Seller to sign an agreement or authorization before closing the Short Sale. What should the Seller do?
A. Some agreements may bind the Seller to repay any forgiven debt. Any party in a short sale should obtain professional legal counsel if they have any questions regarding the transaction or required documents. The Real Estate Agents and Escrow Officer cannot give any legal advice.

Q.I have heard that the IRS will forgive any tax obligation resulting from any forgiven debt from the Short Sale.
A. This may or may not be the case depending on a number of factors. NEVER make any assumption regarding taxes. All parties should obtain professional financial advice regarding the transaction.The Real Estate Agents and Escrow Officer cannot give any legal advice.

Q. Is it true that after the Short Sale, the Seller will not owe anything to the Lender(s)?
A. This will be determined by the Lenders, and the Sellers should satisfy themselves that they are comfortable with the Lender's Short Sale terms.

Q. Who can negotiate with the Lender to get the contract approved?
A. The Escrow Agent cannot act as the Seller's agent. The Seller's Realtor must have an authorization letter from the Seller verifying that they have permission to speak with the lender on the Seller's behalf.

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reprinted from Equity Title Agency Inc.

Larry Naso is a Certified Short Sale Negotiator


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