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Request a Pencil Search for Short Sale Submissions!

By
Title Insurance with Frontier Title Group, LLC FL DFS License #E015761

Too often Realtors accept offers on their short sale listings and submit them to the lender without having the entire picture.  A simple solution?  Request a pencil search!

The title company that you have a relationship with will gladly order a preliminary "pencil" search to check for judgments and liens that may attach to your listing.  These items will be required to be paid from the proceeds at closing and will reduce the amount of the short payoff offered to the bank.  Armed with a pencil search, the title company can prepare a more accurate preliminary Settlement Statement for the Realtor to present with the short sale offer.

By doing your due diligence, the transaction will close smoothly and on time because all expenses will have been accounted for when it is time to close. 

You have one shot to get it right!  Once the bank approves a short payoff amount that's it!  If an unanticipated expense comes up during the processing of the closing, the bank will not budge on the amount they will accept without resubmitting the offer and waiting another 3 months!

Realtors, title companies, condo and homeowner associations, and other lien holders must reduce their commissions, fees, and payoff amounts in order to meet the closing date on the contract and get compensated for at least part of their work.  Otherwise, it's get an extension signed (if the buyer will agree to one) and resubmit the offer to request an updated approval (another 3 month wait).  Bear in mind, there is no guarantee that the bank will accept the new short payoff offer.

It is helpful to review online official records (where available) but a pencil search takes that one step further and includes, for example, a name search.  A name search will identify items such as judgments from other properties the seller may own that would attach to this property and federal tax liens.  These types of items may not be readily available in a simple online records search but would be required to be cleared in order to close the transaction.

Real Estate Taxes are another online search that can identify additional costs that the seller would be responsible to pay from the proceeds at closing.  For past due taxes that have been sold as tax certificates, be sure to consider what the payoff will be as of the date you think the file will realistically close.  Select a closing date 2-3 months out as well to insure you have allowed enough time to get the short sale approved.  Also, tax certificates must be paid with a cashier's check, which may require additional fees from the title company.

For properties other than condominiums it would be prudent to also contact the municipality in which the property resides.  Past due water bills, municipal and code violations, etc. may also give rise to amounts the seller will be responsible to pay for at closing.

Identify and anticipate as many potential expenses to the seller at the time of the presentation of the short sale offer to the bank.  By doing so, you greatly increase the probability that the file will close.   As importantly, you greatly increase the probability that the buyer or seller will not have to pay additional funds or the realtor, mortgage lender, title company, etc. will be asked to contribute commissions and fees that they have rightfully earned.

Comments (4)

Tom Hoffman
Top Priority Realty, LLC - Brighton, CO
Broker/Owner

Thanks Laurie, there is a tremendous amount of good information provided here. I deal with lots of buyers and this information is priceless.

Jul 24, 2010 03:14 PM
Laurie Planamento
Frontier Title Group, LLC - Plantation, FL
Your Florida Title Partner

Thank you!  Hope it helps.  Knowledge is power!!  :)

Jul 24, 2010 03:27 PM
Anonymous
Blake Bishop

Well this is academic essay writing interesting for sure since this is the first time I'm seeing a request for some pencil so it is pretty unique for me haha. Thanks for this.

Feb 20, 2018 12:07 PM
#4