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Short Sale Delays, Misconceptions, and The Truth-Part 1

This is a guest blog post from Michelle Schaefferkoetter at Stewart Title in St. Petersburg, Fl

There are so many misconceptions about selling your home as a short sale these days, so I reached out to Michelle at Stewart Title to give our readers an insight on how the Short Sale process works and what you should be prepared for.

3 things that cause issues with short sales are:

  1. The Sellers and Buyers are not fully prepared for the time frame involved, so be realistic and prepared to wait 60-90 days before you get a response from the seller’s bank. If the loan was a government loan, such as an FHA loan, there will generally be more complications because the government will have to be involved along with the lender.
  2. A second mortgage can be a problem with a short sale. The second lender may have no interest in agreeing to the terms set between the primary lender and the seller, this can pose a real problem. The home cannot be sold without dealing with the second mortgage.
  3. Contracts, addendums and financial packages may be incomplete or expired, and most likely be rejected. This can cause the bank to close out the file and restart the entire short sale process. We cannot stress enough the importance of having all of the documentation required by the Lender to them as soon as possible.

Common short sale questions:

Will I owe money if I sell as a short sale?

Every item on the Seller’s side of the HUD-1 statement will be scrutinized by the Short Sale Lender. Except in the case of a HAFA Short Sale, line 603 of the HUD-1 should always net to zero for the Seller. In most cases this means that the Seller does not bring any money to closing and does not take any money away from closing. On a rare occasion the Lender may require the Seller sign a promissory note to them for an amount to be paid back.

What if there is a lien on the home?

It is very likely that Sellers seeking a Short Sale may have liens and judgments against them that could affect closing the property, so it is important for the Title Company who handles your short sale to run a title search right away. This will allow more time for the Seller or their Attorney to negotiate any judgments, liens or encumbrances.

What role does a title company have in the Short Sale Process?

Short Sales require frequent communication between the Realtor, Title Company and Lender to make sure that closing documents satisfy all the requirements of the Short Sale Lender. Due to the large amount of short sales that the lender is already processing the escrow agent must be persistent in keeping in contact with the lender.

You also want to make sure a title company has Short Sale Certified Staff ready to process and close your files. What does this mean for you? This means they have invested time and money to become short sale specialists.

This is a very unique market and one that will be here for a while. The best thing you can do when it comes time to close is to choose wisely when it comes to hiring a title company. Unfortunately, an inexperienced escrow officer could cost you time, money and put your entire transaction at risk. Experience is crucial in every industry.

*Information courtesy of Stewart Title and America’s Home Rescue.

See Also:

If you are considering a short sale, or if you want to know if you qualify for a short sale, you may want to read 4 Questions To Ask When Contemplating a Short Sale and Tips for Selling Your Home as A Short Sale-Tampa, Fl

Email us for more information on selling your home as a short sale. We have Certified Short Sale Specialist Realtors  that will help you save your home from foreclosure.

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Written by Rae Catanese, Realtor

Licensed Realtor since 2002, Tampa Bay’s own Rae Catanese regularly gives expert advice and insider tips about the Tampa Bay real estate market via her blog, The Tampa Real Estate Insider. If you are thinking of buying or selling a home in the Tampa, St. Petersburg or Clearwater areas-then this blog is for you. I typically post articles once a week. To make sure you don’t miss my newest posts, you can subscribe here! Have a real estate question? Email me here!

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