PRE-FORECLOSURES – Short Sale Situation
Given the number of sub-prime loans, 100% financing, and adjustable rates, an increasing number of homeowners do not have enough equity in their homes to sell them and pay their existing mortgage in full. It is likely to be confronted either with Buyers purchasing property from a homeowner in trouble or with Sellers trying to sell their property where there is insufficient equity to pay settlement charges and existing mortgages.
- SHORT-SALE:
SHORT-SALE OCCURS WHERE THE MORTGAGE COMPANY AGREES TO ACCEPT LESS THAN WHAT IS OWED ON THE PROPERTY FROM A BONA FIDE SALE
- A first or second mortgage holder may be paid a negotiated payoff
- Usually the amount is negotiated by the parties before it is submitted to the closing attorney, but the closing attorney is asked to prepare a preliminary HUD showing all Seller charges and/or Seller paid closing costs
- HUD statement must be approved by the mortgage holder in writing
HICCUPS at Closing:
- 1. Closing attorney has to have any changes to HUD for any reason approved by mortgage holder;
- 2. Buyer’s loan must fund and be disbursed on the same day as closing – THERE ARE NO ESCROW CLOSINGS ON A SHORT SALE
- 3. The negotiated amount did not take into account past due taxes or HOA dues or other liens showing on title and now Seller OWES money instead of having a “zero” net to Seller
- 4. The closing date has changed and a new payoff letter is required
- LIENHOLDER IS REPRESENTED BY AN ATTORNEY
Where the mortgage company has already begun the foreclosure process and there is an attorney involved, the attorney will have to get approval from the bank and will add any foreclosure/attorney’s fees to the payoff. The closing attorney will communicate with the bank’s attorney and get approval on the HUD from the attorney and payoff.
Typically, these must also fund the same day and the attorney could hand deliver the payoff to the attorney’s office.
The TIMING of these closings is crucial – foreclosures occur on the first Tuesday of the month and if the property is scheduled to foreclose, the payoff needs to be received a few days in advance in order to stop the foreclosure
TIPS:
*** TRY TO SCHEDULE YOUR CLOSING EARLY IN THE DAY – IT IS NOT UNUSUAL TO HAVE TO WAIT A WHILE BEFORE THE MORTGAGE COMPANY APPROVES THE SIGNED HUD AND MANY TIMES THE REPRESENTATIVE IS IN ANOTHER TIME ZONE
*** TRY TO SCHEDULE YOUR CLOSING A DAY OR TWO BEFORE THE PAYOFF LETTER EXPIRES, SO IF THE CLOSING MUST BE RESCHEDULED, THERE IS NO NEED TO OBTAIN ANOTHER PAYOFF LETTER
*** LET THE CLOSING ATTORNEY KNOW AS SOON AS POSSIBLE THAT IT IS A SHORT SALE AND PROVIDE A COPY OF THE PAYOFF LETTER
Please give me a call if you have any questions!
–Darcy
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Keller Williams Across Atlanta – Generations Realty Group
Office: 770-874-5356 Cell: 404-441-9986
Email: Darcy@GenerationsRealtyGroup.com
Website: www.GenerationsRealtyGroup.com
