Short Sale Negotiation

What is a short sale?

A short sale occurs when a homeowner sells their home to a buyer for an amount less than the total amount owed on their mortgage(s). In order to do this we must obtain the approval of your lender and/or other lien holders.

In some ways a short sale transaction is very similar to a traditional sale, in other ways it is very different. In a short sale you will list your home for sale, most likely with a Realtor, who can list it on the MLS. After buyer is found and a contract is agreed to between the homeowner and the buyer, then you must apply for and be granted approvals from all parties who have liens against the property. Lien holders can include first mortgage holders, junior mortgage holders, homeowners’ associations/condo association, mechanics liens, judgment liens, etc. Each one of these entities who holds a lien must “sign off” or approve the terms of the contract to release their lien in order for the sale to go through.

What parties are needed to accomplish a short sale?

The Law Office of Jeffrey D. Ostlie, P.A. has strategic partnerships with other real estate professionals necessary to complete a successful short sale. This means that you only need to make a single phone call to The Law Office of Jeffrey D. Ostlie, P.A. at 407-330-5255 or email info@ostlielaw.com and, with your consent, we can notify a qualified Realtor, to contact you and make arrangements to list your home as a short sale. When the time comes for closing the transaction we have licensed title insurance agents who can perform the closing. The parties necessary to completing a short sale are the as follows:

1. Realtor: We recommend that you engage the services of a real estate professional to market the property; a Realtor can list your home on the MLS, which is an extremely powerful marketing system for residential real estate. This gives you the best chance of obtaining the highest contract price possible, which makes it more likely that the lien holders will be amenable to approving the contract terms. If you currently have a relationship with a Realtor, we are happy to work with him or her; however, if you don’t we have Realtors that we work with who we can put in touch with you.

2. Real Estate Attorney: Once a contract is secured a representative of the Law Office of Jeffrey D. Ostlie, P.A. (the “Firm”) will be invaluable in securing the necessary lien holder approvals. The Firm will assist you in completing all necessary paperwork and collecting financial paperwork to be submitted to the lien holders. The Firm will coordinate with the Realtor to ensure that the transaction processes appropriately, while also negotiating with the lien holders to get them to release their liens and hopefully eliminate your responsibility for any deficiencies (for more information about deficiencies please see below).

3. Title Insurance Company: Once the Realtor has secured a contract and the Firm has obtained the necessary approvals a title insurance company will take the file over to close the transaction and issue a title insurance policy for the new buyer.

What do you mean by deficiency?

A deficiency is the difference between what you owe a lien holder and the amount that the lien holder receives after the short sale is closed. For example: You owe $150,000 on your first mortgage, you owe $25,000 on a home equity line of credit (“HELOC”), and you owe $5,000 in past due HOA dues.

Your Realtor secures a contract price on the home of $120,000, after typical closing costs this might leave $105,000 in net proceeds to be distributed amongst the lien holders. A normal distribution of the proceeds might include the First Mortgage Holder agreeing to pay the HELOC $5,000 and the HOA $1,000; therefore, under this example, the deficiency would be as follows:

First Mortgage: $150,000 – $99,000 = $51,000.00

HELOC: $25,000 – $5,000 = $20,000.00

HOA: $5,000 – $1000.00 = $4,000.00

Under this arrangement all the lien holders may be willing to release their liens to allow the short sale to close but without them waiving their right to pursue the deficiencies, you still owe them that money. That means that after your short sale is done you could very well face the lien holders renewing their collection efforts against you to collect the deficiency you owe. They have the right to pursue this against you like any other unsecured debt, which could mean wage garnishment, bank account garnishment, judgment liens against other property or assets you own, etc.

How can the Law Office of Jeffrey D. Ostlie, P.A. help with these deficiencies?

The Firm’s ultimate goal is to get each lien holder to release its lien against your property and waive its right to pursue the deficiency against you. If we are able to accomplish this it means that you could walk away from the property clean, with no financial liability whatsoever.

Are you usually able to get a waiver of deficiency?

We have a tremendous amount of success in obtaining waivers of deficiency. Unfortunately, every deal is different and every lien holder is different so there are no guarantees but it is always our goal to alleviate you from the burden of non-performing asset under the best possible terms to you.

If there is a possibility that I will owe a deficiency after a short sale, then what is the point? Why don’t I just allow the lender to foreclose?

One of the biggest benefits to doing a short sale rather than just allowing the property to be foreclosed is that it gives us the opportunity to try and either get the deficiency waived or at least reduced to where the amount and terms are manageable. If, instead, the property is foreclosed on, it is highly likely that each lien holder(s) will be granted a full deficiency judgment by the court.

If I want to retain the Law Office of Jeffrey D. Ostlie, P.A. to help me with my short sale; where do I find the other parties, like a qualified realtor and title company?

The Firm has relationships with Realtors that we work with on short sales on a regular basis and we can recommend a good Realtor for your specific property and your specific situation. If you already have a Realtor that is fine too, just let us know up front and we can contact them and make sure that we are all on the same page from the beginning.

The Firm also has an ownership interest in a title company, Central Florida Title, LLC. We work closely with Central Florida Title, LLC in successfully closing many short sale transactions.

I have a realtor that told me that he/she is an exper in short sales and that I do not need an attorney, is this correct? Can my realtor just do the short sale on his/her own?

Many Realtors have taken educational seminars pertaining to short sales but the bottom line is that a Realtor, by law, is not authorized to provide the same type of representation that an attorney can. Ultimately, for minimal out of pocket expense you can enjoy the full benefit of having an attorney handle your short sale and provide advice and counsel that only an attorney is qualified to provide.

In our experience the best possible situation for a homeowner seeking a foreclosure is to have a team of professionals, working on your side, each doing what they do best: The Realtor marketing the home, the attorney providing advice and counsel regarding your legal rights and a title company prepared to close the transaction. At The Law Office of Jeffrey D. Ostlie, P.A., we have strategic partnerships in place with qualified professionals who can handle each facet of your short sale transaction.

I am current on my mortgage, but I am having difficulty continuing. I heard that I need to be behind on my mortgage to do a short sale. Should I stop making my mortgage payments?

It is not necessarily true that you need to be behind on your mortgage to get a short sale approved. Every deal is different and every lender is different, but most of the time we can get a short sale approved even if you are current on your mortgage, provided that we can demonstrate that you will likely default on your mortgage in the future if a short sale is not approved. Whether you should continue to make your payments is an individual decision that should be made after you have discussed your personal situation with your attorney and have been advised to the benefits and drawbacks of the decision.  This is something that can be discussed in a free, no obligation initial consultation with the Firm.

 I stopped making my mortgage payments some time ago but I have been current on my HOA/Condo Association payments. Since I am behind on my mortgage should I stop paying HOA/Condo Association payments too?

This is another situation that will depend heavily on the specific facts of your situation. It is something that you should discuss with your attorney to determine the possible ramifications of stopping HOA/Condo Association payments. It is something that can be discussed in your free, no obligation initial consultation with the Firm.

How much will it cost me to have The Law Office of Jeffrey D. Ostlie, P.A. assist me in my short sale?

There is minimal out of pocket expense to you. If after your initial consultation you decide to retain the Firm to represent you in obtaining a short sale we charge a one-time file set up fee of $295.00 to handle the administrative costs of setting up your file and its transmittal to any lien holders necessary to obtain a short sale approval. If we are successful in negotiating a short sale we charge an additional $2500.00, this fee is placed on the settlement statement and is usually paid out of the proceeds of the transaction.

I have decided to retain the Law Office of Jeffrey D. Ostlie, P.A. to represent me in obtaining a short sale. What do I do next?

The first step is to schedule an initial consultation, this can be done by clicking on the following link and filling out the information form info@ostlielaw.com  or by calling the office at 407-330-5255 and a representative of the Firm will contact you to schedule to schedule initial consultation.