Short Sale Approval: What Does It Mean?
Once a bank approves a short sale, it will provide the seller's real estate agent or other third party representative with the short sale approval letter. It sounds simple, but most Metro Atlanta Short Sale Realtors agree it's imperative that a homeowner understand exactly what the short sale approval letter says and means, before signing it.
The short sale approval letter sets forth the terms and conditions relating to the bank's agreement to accept less than what is owed on the mortgage in order to facilitate the sale of the property and avoid the time and expense of a foreclosure sale.
Every homeowner who is short selling his home, should carefully read the short sale, paying particular attention to the following:
The total amount due on the loan is important for a couple of reasons. First, because the amount of forgiven debt may be taxable under certain circumstances, it's important that what is owed be properly calculated. It is not uncommon for banks and servicers to miscalculate the total amount due. Oftentimes, payments have been misapplied or excessive fees have been applied. So, if there are doubts about the total amount due, ask the bank to provide a detailed payment history.
Another reason it's important for the total amount due to be accurately set forth in the short sale agreement is that the bank will rely on the short sale approval bearing the homeowner's signature as proof that the homeowner agreed the total amount due on the loan was correctly set forth in the agreement. It may be too late to challenge the amount due at the hearing on the bank's request for a deficiency judgment.
SHORT SALE PAYOFF AMOUNT
The short sale payoff amount is important because the figure on the HUD-1 settlement statement must match the figure on the short sale approval letter. Although the bank will review the final HUD before closing, every homeowner should take the time to make sure the figures match. Last minute changes to the settlement statement because of changes to amounts due for taxes, HOA dues, or other fees require approval by the bank and can delay the closing.
The short sale payoff amount is also important for the same reasons mentioned above relating to the importance of the total amount due on the loan.
EXPIRATION DATE
The short sale approval letter will state the last date on which the sale must close. If, for any reason, the sale does not close by that date, it may be possible to obtain an extension. Unfortunately, some banks reserve the right to increase the short sale payoff amount if the transaction does not close before the approval letter expires.
FEES
The short sale approval letter will state the amount of all fees the bank is willing to pay in connection with the short sale of the property. If the payoffs on certain fees like HOA dues, utilities, and property taxes are more than the amounts approved by the bank, the homeowner will be responsible for making up the difference. In some cases, the homeowner can apply the seller incentive to paying off these fees.
SELLER CONTRIBUTION TO CLOSING
In some instances, the bank may demand that the homeowner make a cash contribution to offset its loss. Alternatively, the bank may ask the homeowner to sign a promissory note. In either case, a homeowner needs to be aware of and understand the ramifications of agreeing to these conditions before signing the short sale approval letter.
RELIEF FROM LIABILITY
One of the biggest misconceptions homeowners have about short sales is that by approving the short sale, the bank has agreed to waive its right to seek a deficiency judgment. Unless the short short sale approval letter specifically states that the bank is relieving the homeowner of liability for the short fall, the bank's right to seek a deficiency judgment remains in full force and effect.
If you are negotiating with your bank to short sell your home, be sure to read the short sale approval letter carefully. Don't be afraid to Ask your Realtor, attorney or third-party representative to explain anything you don't understand.
If you are considering a short sale and would like to schedule a no obligation consultation, please give me a call at 678-446-5925.
The short sale approval letter sets forth the terms and conditions relating to the bank's agreement to accept less than what is owed on the mortgage in order to facilitate the sale of the property and avoid the time and expense of a foreclosure sale.
Every homeowner who is short selling his home, should carefully read the short sale, paying particular attention to the following:- The total amount due on the loan;
- The short sale payoff amount;
- The expiration date of the approval;
- The fees the bank has agreed to pay in connection with the sale of the property, such as closing costs, real estate commission, property taxes, homeowner's association dues, utility bills, and repairs;
- Whether the homeowner must sign a promissory note or make a financial contribution to offset the bank's loss; and
- Whether the bank is waiving its right to seek a deficiency judgment.
The total amount due on the loan is important for a couple of reasons. First, because the amount of forgiven debt may be taxable under certain circumstances, it's important that what is owed be properly calculated. It is not uncommon for banks and servicers to miscalculate the total amount due. Oftentimes, payments have been misapplied or excessive fees have been applied. So, if there are doubts about the total amount due, ask the bank to provide a detailed payment history.
Another reason it's important for the total amount due to be accurately set forth in the short sale agreement is that the bank will rely on the short sale approval bearing the homeowner's signature as proof that the homeowner agreed the total amount due on the loan was correctly set forth in the agreement. It may be too late to challenge the amount due at the hearing on the bank's request for a deficiency judgment.
SHORT SALE PAYOFF AMOUNT
The short sale payoff amount is important because the figure on the HUD-1 settlement statement must match the figure on the short sale approval letter. Although the bank will review the final HUD before closing, every homeowner should take the time to make sure the figures match. Last minute changes to the settlement statement because of changes to amounts due for taxes, HOA dues, or other fees require approval by the bank and can delay the closing.
The short sale payoff amount is also important for the same reasons mentioned above relating to the importance of the total amount due on the loan.
EXPIRATION DATE
The short sale approval letter will state the last date on which the sale must close. If, for any reason, the sale does not close by that date, it may be possible to obtain an extension. Unfortunately, some banks reserve the right to increase the short sale payoff amount if the transaction does not close before the approval letter expires.
FEES
The short sale approval letter will state the amount of all fees the bank is willing to pay in connection with the short sale of the property. If the payoffs on certain fees like HOA dues, utilities, and property taxes are more than the amounts approved by the bank, the homeowner will be responsible for making up the difference. In some cases, the homeowner can apply the seller incentive to paying off these fees.
In some instances, the bank may demand that the homeowner make a cash contribution to offset its loss. Alternatively, the bank may ask the homeowner to sign a promissory note. In either case, a homeowner needs to be aware of and understand the ramifications of agreeing to these conditions before signing the short sale approval letter.
RELIEF FROM LIABILITY
One of the biggest misconceptions homeowners have about short sales is that by approving the short sale, the bank has agreed to waive its right to seek a deficiency judgment. Unless the short short sale approval letter specifically states that the bank is relieving the homeowner of liability for the short fall, the bank's right to seek a deficiency judgment remains in full force and effect.
If you are negotiating with your bank to short sell your home, be sure to read the short sale approval letter carefully. Don't be afraid to Ask your Realtor, attorney or third-party representative to explain anything you don't understand.
If you are considering a short sale and would like to schedule a no obligation consultation, please give me a call at 678-446-5925.
Comments
Post a Comment