why does a buyer need a lawyer in a short sale

Full Answer

Do I need a lawyer for a short sale?

A lawyer can be useful in various situations, such as when there is a possibility that a deficiency judgment will be entered against the homeowner; when a homeowner needs help understanding the terms of a short sale agreement; and where a homeowner thinks that a foreclosure is bound to happen regardless of the short sale.

Why do you need a lawyer when buying a home?

Buying a home will probably be the largest and most significant purchase you will make in your life. It also involves the law of real property, which is unique and raises special legal issues and problems not present in other transactions. A real estate lawyer is trained to handle these problems and has the most experience to deal with them.

How does a short sale benefit The homeowner?

A common example of how a short sale may benefit the homeowner is when the homeowner has defaulted on their mortgage loan. Instead of having to face a foreclosure action, the homeowner can use the proceeds they received from the short sale to pay off their lenders.

Can a bank ask for a seller contribution for a short sale?

If the seller is attempting a short sale without hardship, it is highly likely that the bank will ask for a seller contribution. Even if the seller qualifies for a short sale through a financial hardship, the bank could demand a contribution. This means the seller could be required to bring in money to close.

How does a short sell work for the buyer?

In a short sale, the bank or mortgage lender does not evict the homeowner. Instead, the lender lets the current owner sell the house for less than their mortgage debt. The benefit of buying a short sale is that you could find a home at a reduced price.

Do you have to pay back a short sale?

All of the proceeds of a short sale go to the lender. The lender then has two options—to forgive the remaining balance or to pursue a deficiency judgment that requires the former homeowner to pay the lender all or part of the difference. In some states, this difference in price must be forgiven.

How do you negotiate a short sale?

7 steps to easily negotiating the purchase of a short sale propertyCommunicate and Set Expectations.Gauge the Market.Advise About Lowball Offers.Know that Short Sales Are More Attractive When You Have a Cash Buyer.Once You Make the Offer, Be Patient.Remember That You're Negotiating With the Lender.Be Resolute.

Which is the most likely consequence of a short sale?

But a short sales results in a loss on the loan, and the end of interest payments and servicing charges that represented the lender's profit.

Can a seller make money on a short sale?

Why a Short Sale? In a seller's ideal home transaction, the sale price will pay off the existing mortgage and the seller may even make a profit.

Why do banks prefer foreclosure to short sale?

It costs more to the lender to go through the foreclosure process. During a short sale, the lender shares the cost with the homeowner to quickly sell the home. From a financial standpoint, many lenders prefer a short sale if the home is not expected to sell for more than the balance due at the foreclosure auction.

What's a good strategy for a buyer making an offer on a short sale?

Offer a Strong Earnest Money Deposit.Check the Comparable Sales.Don't Ask for Special Reports or Repairs.Give the Bank Some Time.Assure the Seller You'll Wait.Offer to Pay the Seller's Fees.Shorten Your Inspection Period.Provide a Strong Preapproval Letter.

What's one reason that buyers might need additional cash at closing for a short sale?

What's one reason that buyers might need additional cash at closing for a short sale? Short sales don't clear liens from the title, so buyers may have to pay debts at closing.

What is a professionally negotiate short sale?

A short sale negotiator works on behalf of a seller to reach a short sale approval with a bank or other lender. The individual's job is to persuade the lender to agree to accept less than the debt owed on the mortgage in order to allow the short sale to occur.

Who benefits from a short sale?

For the seller, a short sale presents less damage to his credit report than a foreclosure, and allows him to recover and buy a new house more quickly. This sense of cooperation between the seller and buyer may facilitate the exchange and get the new owner into the house more quickly.

Can you offer less on a short sale?

Can You Negotiate A Short Sale? It is entirely possible to negotiate a short sale, but doing so can be a time-consuming process. Instead of negotiating with the seller alone, as is the case with most traditional sales, short sale negotiations must be approved by the lender, too.

What happens when a short sale fails?

The loss created by a short sale-gone-bad is like any other debt. If you are unable to directly pay what you owe, you will have to sell other assets to cover it or—worst-case scenario—file for bankruptcy.

What is a short sale agreement?

The terms of a short sale agreement are best interpreted by a real estate attorney, because it has a legal interpretation and legal consequences. While a lender may issue a short sale approval letter, for example, the seller may still be accountable for any deficiency following the closing. The attorney may need to advise on whether a Bankruptcy might be necessary and, if so, when the timing would be best. Bottom line: only an attorney can advise your client about the legal impact of the terms of the agreement and what legal rights they have and options they should consider.

Why is it important to have a confidential relationship with a seller?

The confidential relationship between a seller and an attorney affords the most protection because the attorney doesn’t have to disclose confidential information regarding the seller that might jeopardize a short sale or force a contribution. For example, an attorney can represent a seller who has exempt assets--ones that no creditor can have the right to access--and keep that information private. A listing agent, by contrast, may not have that luxury.

Do lenders ask for a counter offer in Illinois?

Upon conducting a Broker Price Opinion (BPO), lenders will always ask for a counter offer if they don’t agree with the value of the listing.

Why do you need a lawyer for a short sale?

Why You Need to Hire a Lawyer to Negotiate a Short Sale. To cut to the chase, if you have legal questions, you need to hire a lawyer. It is against the law for a real estate agent who is not licensed to practice law to dispense legal advice. Even if the agent knows the answer to a legal question, a real estate agent is not allowed to tell you. 1.

What does a bank look for in a seller's financial statement?

Banks scrutinize a seller's financial statement. Banks examine a seller's bank accounts, tax returns and have been known to pull a seller's credit report. If the bank is taking a loss on the sale, obviously the bank would like to recoup part of that loss. That's why the bank looks at the seller's assets and disposable income.

Can a short sale be a hardship?

If the seller is attempting a short sale without hardship, it is highly likely that the bank will ask for a seller contribution. Even if the seller qualifies for a short sale through a financial hardship, the bank could demand a contribution. This means the seller could be required to bring in money to close. Laws in California protect sellers of 1 to 4 units. 4

Can a bank ask for a short sale?

That's why the bank looks at the seller's assets and disposable income. If the seller is attempting a short sale without hardship, it is highly likely that the bank will ask for a seller contribution. Even if the seller qualifies for a short sale through a financial hardship, the bank could demand a contribution.

Is it a good idea to negotiate a short sale?

Needless to say, that's why the listing expired and the short sale canceled. It's not a good idea to try to negotiate your own short sale, for a multitude of reasons. On the other hand, there are plenty of real estate agents running around who are calling themselves certified short sale specialists because they slept through a 3-hour class somewhere but have closed few, if any, actual short sale transactions.

Can a lawyer help a seller with a short sale?

Once the short sale has closed, most sellers would like to put the ordeal behind them. A lawyer can offer a seller this assurance. A real estate agent cannot.

Why do you need a lawyer for a home purchase?

A lawyer can help you avoid some common problems with a home purchase or sale. For example, a seller may sign a brokerage agreement that does not deal with a number of legal issues. This happens quite often as realtors often use standard forms, expecting that they will cover all situations.

What is real estate lawyer?

A real estate lawyer is trained to handle these problems and has the most experience to deal with them.

What is a purchase agreement?

The purchase agreement is the single most important document in the transaction. Although standard printed forms are useful, a lawyer is helpful in explaining the forms and making changes and additions to reflect the home buyer's and the seller's desires. There are many issues that may need to be addressed in the purchase agreement, such as: 1 If the property has changed or if there has been an addition to the property, was it done lawfully? 2 If the buyer has plans to change the property, can that be done lawfully? 3 What happens if a buyer has a home inspector inspect the property and termites, asbestos, radon, or lead-based paint is found? 4 What if the property is found to contain hazardous waste? 5 What are the legal outcomes if the closing does not take place, and what happens to the down payment? 6 Will the down payment be held in escrow by a lawyer according to the escrow instructions? How is the payment to be made? Is the closing conditioned upon the buyer obtaining financing?

What is the role of a realtor in a home purchase?

In the typical home purchase, the seller enters into a contract with a real estate agent, usually in writing. When the broker finds a potential buyer, they conduct the negotiations and most often act as an intermediary (the go-between).

What is the formal contract for the sale of a home?

Once an informal agreement is reached, the buyer and seller enter into a formal written contract for the sale of the new home. This is known as the purchase agreement . The home buying process then follows the following steps:

What is the most important document in a home purchase?

The purchase agreement is the single most important document in the transaction. Although standard printed forms are useful, a lawyer is helpful in explaining the forms and making changes and additions to reflect the home buyer's and the seller's desires. There are many issues that may need to be addressed in the purchase agreement, such as:

Can a seller be forced to pay more than one brokerage commission?

In the absence of an agreement to the contrary, the seller may become liable to pay a brokerage commission even if a sale does not occur, or they may be forced to pay more than one brokerage commission. If the agreement allows the seller the right to negotiate on their own behalf, however, you may avoid this potential problem.

What is a Short Sale?

In a short sale, the lender agrees to let you sell the property for less than what you owe on the loan and to accept the proceeds in exchange for releasing the mortgage lien.

What is short sale in mortgage?

Short sales are one way for homeowners who are behind in mortgage payments to avoid a foreclosure.

What happens if a lender forgives you?

Keep in mind you might face tax consequences if the lender forgives all or part of the deficiency. If the lender does get a deficiency judgment against you, an attorney can potentially help you file bankruptcy to get rid of the judgment—and provide advice about whether this is a good idea.

What happens if a short sale falls through?

If the short sale falls through, the lender might pursue a foreclosure against you. An attorney can review the foreclosure papers and advise you about your different options if this happens.

What is the difference between a short sale and a mortgage?

In a short sale, the difference between the sale price and the total mortgage debt is called a "deficiency.". Again, let's say the total debt you owe on the first mortgage is $200,000, but the short sale price is $150,000. The deficiency is $50,000. In most states, the lender can seek a personal judgment against you to recover ...

What to do if you have a deficiency judgment?

If you need legal advice about your risk of a deficiency judgment, you should consider hiring a lawyer who can advise you about your particular situation. Also, good lawyers have extensive skills in negotiation. In the event that you're facing a potential deficiency judgment, a lawyer can help: negotiate a waiver of the deficiency, or.

What is the difference between a real estate agent and a lawyer?

The primary difference between lawyers and real estate agents when it comes to short sales is that a lawyer can not only negotiate the short sale, but also give you legal advice about the transaction. And, in many instances, the lawyer can represent you in a foreclosure action or help you file bankruptcy, if the short sale falls though.