Are you confused whether to go the short sale route when selling your Staten Island home?
Especially since the economic downturn in 2008, my Staten Island law firm has received many inquiries on the subject.
Below is a brief introduction about short sales. Of course, contact me to learn more.
For buyers, short sales are great deals! For sellers, it’s a way to get out of a mortgage. For a successful short sale transaction to occur, lots of negotiating is necessary.
A short sale occurs when a bank agrees to release a lien against a property by taking less than is actually owed on the mortgage. A short sale is an alternative to a foreclosure and/or filing bankruptcy and not all banks will accept short sales, especially if it makes more sense (financially) for them to foreclose. In recent years, banks have been generally willing to accept short sales for Staten Island real estate transactions, but this is always changing.
There are many factors that a lender will consider when making a decision on whether or not to agree to a short sale. This includes how long and how much it will cost to foreclose a Staten Island property, in addition to the fair market value of the property. Usually, the most important issue is how close to market value the bank can net, not how much the deficiency (i.e., net loss) will be.
Taking into account that a lender will typically accept to taking less than what is actually owed on the mortgage, why would a seller attempt a short sale? As mentioned earlier, short sales are an alternative to foreclosures and/or bankruptcy.
A foreclosure will negatively impact a person’s credit score for many years. A short sale, though still a blemish to a person’s credit score, is far better than a foreclosure and a person’s credit will rebound from a short sale much faster than from a foreclosure.
Remember that a short sale is a negotiation, so every deal is different – sometimes the seller may need to bring money to the table or sign a note to get the deal approved with the lender. Short sale transactions are usually not pleasant experiences. If you are a short sale candidate, whether you are a buyer or seller, it’s a good idea to hire an experienced Realtor and a Staten Island real estate attorney who is also experienced in the subject. Patience is also required in seeing the deal go through.
Tips For Real Estate Agents
If you are a real estate agent, here are some important questions to ask your short sale client:
- How many mortgages do they have?
- If two, are they with the same bank? (Negotiating with one bank is always easier than two.)
- How much do they owe on each mortgage?
- Why did they default on the mortgage? (Most lenders require some form of hardship)
- Are there any violations affecting the Staten Island property? (This is a huge impediment for buyers that are getting financing for a short sale – the best candidate for a short sale, in terms of buyers, is a cash buyer that can purchase as is.)
Now that you have this information, the next step is to figure out the value of the Staten Island property.
** A solid short sale candidate will be asking for a sale price that is close to the fair market value of the property. **
Once you have a good offer, the next step is to refer the client to a Staten Island attorney that will then prepare contracts and then prepare a Short Sale Package to send to the lender(s).
Items to keep in mind and inform the client about:
- Usually, the seller will not receive any proceeds from the sale transaction.
- Usually, the lender will pay all closing costs, including broker fees, attorney fees and various other closing costs, if they agree to a short sale.
- Property and land records are public documents. You can access land records such as deeds and mortgages online by going to the Richmond County Clerk website(for Staten Island properties).
- Check for Building Department Violations here.
- Check Property Taxes and Open Water Charges here.
For more questions about short sale transactions in Staten Island, do not hesitate to contact me to learn more.
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This information, based on New York law, was provided courtesy of The Law Office of Christopher J. Arrigali, P.C. It is intended to inform, not to advise. No one should try to interpret or apply any law without the assistance of legal counsel.