FREQUENTLY ASKED
QUESTIONS
The following is not to be construed as legal
advice. Consult an attorney.
What is the Kayser Short Sale Law
Firm?
A
law firm licensed in Missouri and Illinois with extensive success in
facilitating short sale transactions, our firm specializes in working with
lenders to obtain an approval for the short sale in order to get the subject
property sold.
What is a “short sale?”
A
short sale is when a homeowner is able to sell their home for less than what
they owe their lender for their mortgage. If banks never accepted short payoffs, then the homeowner would have no
choice and either could never sell their home, or they would have to bring the
cash difference to the table (typically tens of thousands of dollars), or they
would walk away resulting in a foreclosure, which would devastate their
credit. Millions of homeowners are
behind on their mortgage due to job loss, loss of income, medical problems,
death of a spouse, losing a business due to the economy, divorce, a bad loan they
never really qualified for. Up to the
recession and market crash of 2008, the only generally accepted option was
foreclosure.
Solution: Short
Sale. Get the lender to accept an amount
below the mortgage payoff and waive the deficiency against the homeowner. In most cases, all closing costs are built
into the deal where the lender pays the closing costs. Lenders generally demand fair market value for
the property – which in a short sale is significantly below the mortgage
balance.
Should real estate agents
negotiate short sales?
No. Absolutely not. It is replete with legal issues, risks,
deficiency issues (amounting to tens or hundreds of thousands of dollars of
liability to the Seller), tax implications which can be huge, foreclosure
attorneys that need to be dealt with, bankruptcy courts/attorneys, divorce
attorneys, U.S. attorneys in the release of tax liens, collections agencies,
debt collector law firms, mortgage fraud, fraudulent short sale transactions by
the buyer, etc.
What are the credit implications of a short sale?
The number one reason a distressed homeowner should proceed with a short sale
is to protect their ability to obtain financing in the future.
Most short sales result in a “settlement” status on their credit report as
opposed to “foreclosure." Fannie Mae and Freddie Mac guidelines are much more
favorable to borrowers with short sale on their credit report, typically
allowing a borrower to obtain financing for a new home within a couple of
years. In sharp contrast, a foreclosure remains on a credit report for seven
years, making it very difficult to finance another house, a car, open a new
business, or even qualify for credit cards. Any loans received will most likely
bear very high interest rates. Bottom line: the end result of a short sale is
minor when compared to the consequences of a foreclosure. Foreclosures have a
devastating effect on credit history, job security, employment opportunities,
security clearances, military and law enforcement careers, and the most serious
of all - the ability to purchase a home in the future. Also, a foreclosure
becomes public record, which is searchable by anyone, and can never be removed.
A
Short Sale offers a fresh start, eliminating debt, while minimizing damage to
credit and avoiding eviction proceedings.
When should an attorney
get involved and what is the fee?
A qualified attorney should be involved in the
transaction immediately! We receive numerous Sales Agreements from real estate
agents who have spent a lot of time and money on their listing only to become
frustrated when we inform them that the transaction cannot be
negotiated! Wouldn't it be nice to find out if the deal will go
through before you even take a listing and spend your precious time and
hard earned money? Now you can, by referring the client to this
firm. The reason you hear horror stories of Short Sales taking forever
only to have your commission cut is because the real estate agent failed to
qualify the transaction through an experienced attorney. Do not end up
like one of the daily agents we speak to who has wasted their time and money on
a hopeless sale! There is no consultation fee whatsoever; we'll speak to
whomever you'd like in order to ensure you concentrate your effort towards
worthy endeavors.
A real estate agent cannot give legal advice as to
deficiency judgments or if there will be a complete release of liability or
pending foreclosures, stopping foreclosures, interpreting bank approval
letters, tax advice, otherwise the agent begins to negotiate legal terms which
result in a legal settlement that is binding against the homeowner and can
put the homeowner at grave risk, which is the practice of law. Giving advice as to legal issues from a
non-attorney is the Unauthorized Practice of Law, a Class 1 misdemeanor. Furthermore, ones Errors and Omissions policy
would typically exclude any unauthorized practice of law.
What
services are provided by Kayser Short Sale Law Firm?
A
crucial part of the SHORT SALE process is negotiating the terms of the short
sale. In order to provide the best possible result, we gather the relevant
information from the seller, prepare a hardship package to submit to the bank,
perform a preliminary title search on the property to determine what liens,
mortgages and taxes are due on the property if one has not already been done,
and negotiate with the bank in an attempt to have them accept a lower payoff on
the mortgage than is currently due … potentially avoiding the credit impact and
economic ramifications of a foreclosure or bankruptcy. Most importantly,
regular updates and status reports are provided to realtors and homeowners as
to the short sale process. Communication is everything and will never be
compromised. We will be a team in the short sale process requiring a continuous
flow of communication. The Firm assists in each of the following steps, which
are all critical in the path to short sale approval:
- Prequalifying the homeowner
- Assemble excellent lender packages
- Directly and immediately respond to negotiators' calls and emails
- Immediately provide well-written market narratives and critical
analyses proving price
- Ensure that appraisers and bank BPO agents understand the subject
property's challenges
- Immediately provide additional documentation required by the lender
- Keep the parties well-informed and in the deal
- Document all tasks in detail for transaction-saving reference
- Provide creative solutions to banks’ demands such as promissory
notes and cash contributions
- Applying 17 years of negotiations skills to ensure success
What fees are associated with the short sale
process?
We
have been extremely successful at having our attorney fees paid by the lender
as a part of closing costs. Our standard
fee is $3000 for our short sale negotiation fee AND for the legal
representation of the Seller. Many times, we will cut our fees to get the deal
to close. In some cases, where it is known the lender may not pay our fees
and/or where the risk is high, an advanced fee will be collected from the
Seller. Also, in other instances, the
Seller may have to bring money to the table to clear other liens such as HOA,
MSD, and other judgments.
Commissions
In
the vast majority of short sales, the commissions will be 6%. All GSE loans are 6%, however this commission
may be cut down if the agent is a dual agent and represents both seller and
buyer. Also, if a buyer is also a real
estate agent, the lender will usually not pay the buyer a commission.
What do I need to do to qualify
for a short sale?
The
bank will have to be convinced that the seller deserves to be approved for a
short sale. They will need to disclose to the mortgage lender financial
hardships, including layoffs, loss of jobs, divorce, medical issues. Some or
all of the following would be required: hardship letter signed by the
homeowners, 2 years tax returns, recent pay stubs, bank statements, authorization
for the negotiator to discuss the mortgage with the lender. Lenders also
request listing history, recent sold properties, repair estimates and photos,
second mortgage payoffs if any, and other lien information. Lenders will
furnish their requirements as to sellers’ assets, liabilities, income, and
obligations. Our hardship package aims to fit within each Lender’s parameters.
Each lender has different parameters, a different short sale policy. The
contract must not be contingent upon the sale or closing of another property,
also the seller cannot do owner-financing or carry-backs. The Lender often
times verifies with the buyers lender that they are pre approved with no
contingencies. Also, properties with multiple mortgages, 2nd liens are not the
best short sale candidates but it can work.
Short
sales may take longer to close than more conventional sales, so plan
accordingly. However, it is well worth it. Again, the alternative –
foreclosure.
How is a sales price determined?
Most
lenders will request a BPO (broker’s price opinion) or full appraisal of the
property. In some cases they will use a drive-by value or a computer analysis
comparing other similar homes that have sold. In this real estate market, this
is very difficult – there are few sold homes! This is where the negotiation
begins. Some factors negotiated are such things as close proximity to power
lines, railroads tracks, busy streets, high numbers of neighborhood
foreclosures (blight), declining market, repairs needed, the banks loss
severity rate in a foreclosure to justify our offer price. Also negotiated hard
is the lenders’ Loss Severity.
How does bankruptcy affect a short sale?
- Lenders cannot consider a short sale if the borrower is in an
active bankruptcy. The bankruptcy would have to be discharged or dismissed
prior to the lender considering a reduced payoff.
- There are many bankruptcies that are filed to save a homeowner from
the deficiency judgment or shortage in the sale of their home – when
really all they needed was a short sale of their home!
- A bankruptcy stays on the homeowners credit report for 10 years.
- Bankruptcies typically only delay the inevitable. . . a
foreclosure. Then the homeowner has both a bankruptcy AND a foreclosure on
their credit report. The worst case scenario for anyone.
What is the difference between a short sale and a foreclosure?
Foreclosure
is devastating to one’s credit report. Someone who goes the short sale route
generally can buy a home in less than 2 years, compared 5 years and after a
foreclosure. Many employers run credit checks on prospective employees and
foreclosure is one of the top items that will put a potential new hire in
jeopardy. Also, current employers may run credit checks and a foreclosure can
put a current position in jeopardy. Security clearances (law enforcement) and
government positions can be jeopardized by a foreclosure. Additionally,
interest rates will be markedly high on
credit cards and any credit with a foreclosure or a deed in lieu on one’s
credit report.
- The lender can still pursue the former homeowner with a Judgment
for any deficiency after the property sells under foreclosure, which is
typically 25% more than the deficiency resulting from a short sale if it
is not waived. This foreclosure deficiency tacks on attorney fees,
costs to sell the property, property preservation fees, insurance,
taxes, and the like.
- Foreclosures eliminates the chance of a homeowner to
repurchase another home for years after a foreclosure is
reported on one’s credit. So, realtors are excluded from the
foreclosure process and transactions, plus they have just lost another
potential buyer of another home. . . for years.
- From the lenders standpoint – see Loss Severity Rate above! Enough
said.
What will happen to the
defaulting homeowner's credit and will they be responsible for the deficiency?
An agent should not be answering
these questions. The questions above are best answered by an attorney
who answers these questions on a daily basis. You do not want to make any representations as
to this nature, since your client can hold you accountable after the closing
due to something they misunderstood. At Kayser &
Associates, LLC. we make your job as easy as possible by asking you do one
thing: sell the home as close to the "fair market value" as possible.
That's it. Do not answer any legal questions asked by your clients.
Simply refer them to this firm and we will handle everything.
How long does the process take?
In general from submittal of the
short sale offer (not including the time it will take to get an offer after the
property is listed) to bank approval (not including the 30 days or so it takes
to close after approval) is usually 45-60 days.
It is case by case depending on who the lender is, if it is a GSE loan,
mortgage insurance, number of mortgages, participation of the borrower/seller,
the load at the loss mitigations dept at the lender. Fixed timelines of milestones at the banks
processing center. The efficiency of the
lender, investors such as Fannie Mae, Freddie Mac, VA, and FHA.
