Short Sales, When You Represent the Seller

By
Services for Real Estate Pros with Law Office of James Miner LLC

James M. Miner, Esq.

 
 

A short blog post tonight on one of my pet peeves; the mishandling of short sale negotiations.

I've handled many NJ short sales; sometimes representing the seller and sometimes the buyer.  I see clients, agents and attorneys alike getting caught up in whether or not the bank that holds the lien on the property will accept the deal.   Certainly, if the bank does not accept, then there is no deal.  We wait and wait for the bank to respond and by the time it does, everyone is so relieved that the deal has been accepted that they don't take the time to consider all the terms of the acceptance.

The issue is simply that while the lender agrees to release its lien on the property for less than full loan payoff, the bank does not automatically release its claim against the owner/seller of the property for the shortage.  This means that the bank will retain its claim and will retain its ability to sue the seller for the difference, unless the agreement specifically state otherwise.

Maybe you'd think that this isn't so bad.  After all, the seller did owe the money in the first place.  But consider that the seller doesn't understand that the shortage will follow him/her.  99 out of 100 short sale sellers will assume that they are free and clear of the loan once the short sale goes through.  Also, the seller is giving up something by going through with the sale.  Without the sale, the seller could live in the home for many additional months at no cost until the bank forecloses.  By selling short the seller has to vacate the home earlier than he/she otherwise would have to, and walks away with absolutely nothing.  The short sale actually benefits everyone involved in the transaction EXCEPT THE SELLER. 

So if you represent a seller in a short sale, take the bank negotiations one step further and get the bank to agree to release the seller from the shortage.  It's not difficult.  I haven't had a case yet where this couldn't be worked out.... but someone has to ask for it.

Thanks for reading.  Jim 

The Law Office of James M. Miner, LLC

 Westfield Office                  Short Hills Office

533 South Ave West            7 Short Hills Ave.

Westfield, NJ  07090         Short Hills, NJ  07078

908-232-9962                            973-315-3089

 908-232-9965 (fax)        

www.BuyersLawyer.com

 

 

 

 

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Groups:
NJ Law
Tags:
short sales
nj law
nj real estate law

Spam prevention
Show All Comments
Rainmaker
238,560
Angelia Garcia
Pure Realtors - Dallas, TX

Thanks for the info. I am representing two sellers that are facing possible foreclosures. We are now in the process of getting a short sale approved.

Jul 14, 2008 03:48 PM #1
Rainer
10,468
Darrel Davis
Winter Garden, Florida - Winter Garden, FL
Southern Heritage Realty

A short sale should not include just a listing agent fighting for the seller. You need to get legal aide, credit counseling and mortgage counseling. At least that is what I do, I get the seller all the help they can afford, and all the things that I mentioned are free of charge to my clients. Even a GOOD title company will help to negotiate on the seller's behalf, you just need to get them a 3rd party form so they too can communicate. There are so many things that can go wrong in a short sale that it helps to have every angle covered with top notch communication among everyone involved.

You mentioned negotiations for the seller, but you didnt post on how. Could you build on the angle that you use just a little so that 3 to 4 phone calls aren't wasted by most agents looking for the way to go about it?

Thanks for all your hard work you do for your sellers, it is definately appreciated. Without caring, considerate and CAPABLE agents doing this service we would all be in a bigger jam than we are now.

Jul 14, 2008 03:59 PM #2
Rainer
19,256
Wayne Gabriel
RE/MAX Premier Group - Wesley Chapel, FL
GRI, SFR 203K Certified

Great post and excellent advise, James.

I have the same queation as Darrell: How do you negotiate the release of the seller from the debt liability? This has been particularly difficult for me in a deal I am currently working becasue I am dealing with an outsourced loss mitigation company and have not been able to contact the negotiator directly.

Jul 14, 2008 11:58 PM #3
Rainmaker
26,822
James Miner, Esq.
Law Office of James Miner LLC - Westfield, NJ

When I represent a seller I make this a condition of the deal to the lender.  Remember, the seller has no incentive to go through with the transaction unless he/she is released from personal liability for the shortgall.  That is all they get out of the deal.  If the lender wants to get out from under the house, and avoid foreclosing and holding the home, they will go along with it.  

Usually it is just a clerk in the lender's pre-foreclosure department that we are dealing with.  As long as they get approval from their superiors for the dollar amount they will usually go along with this.  To help this along I will even give them the exact wording that I want in their payoff letter.

 

 

 

Jul 15, 2008 12:51 AM #4
Rainer
19,256
Wayne Gabriel
RE/MAX Premier Group - Wesley Chapel, FL
GRI, SFR 203K Certified

Thanks for the input. Would it be appropriate to ask a case specific question in this forum? (Minus names and other details.)

Jul 15, 2008 08:22 AM #5
Anonymous
Jonathan Christopher

I myself also get frustrated when the ball is dropped when negotaiting a short sale.  Some people just do not know or do not take the time to correctly short sell real estate.  It can have disasterous results for a homeowner and if someone isn't 100% sure about how to negotiate than leave it to the professionals.

Jul 17, 2008 05:15 AM #6
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
26,822

James Miner, Esq.

Ask me a question
*
*
*
*