Before I launch into this post I want to make it clear that this does not imply, suggest, offer, hint at, or insinuate legal advice, nor should you assume, deduce or presuppose the same! Also, my purpose here is not to malign the legal profession (actually, they’ve done a pretty good job of that on their own) but to suggest from our experience that you consider using a title company to facilitate your short sale instead of a lawyer.
Now, before Lady Justice smites me with her sword and my lawyer friends start writing me poison pen letters, please let me explain…
the inspiration for this post came from a recent client of ours who hired a law firm, before hiring us, to do their short sale.
The upshot of this regrettable action was that the lawyer (I think we went through two or three at the firm) never returned our calls, often did not return the sellers calls and, as a result, we lost 3 potential buyers and months of time and it’s still unresolved due to no communication– not to mention the expense to the seller.
I decided to dig into this a little further and I’m sharing this info with you so hopefully you won’t make the same mistakes.
When a person is under water on their home (talking financially here), has fallen behind and can’t keep up with their mortgage payments and/or has to move and is unable to sell their home for the amount owed, a short sale may be a good option. Sometimes, unfortunately, if a seller is behind by many months and receives a lis pendens on their property, they may panic and call the first lawyer available, concerned that their house could quickly be taken from them, or that the wrath of their mortgage company could result in the death and destruction all life and the universe as we know it – not saying it’s rational – just natural!
There is something you should know, however, about Florida, #1 All foreclosures in the State of Florida must go through the court system. #2 In MOST cases the deficiency judgement (the difference between the mortgage balance owed by the seller and the amount realized through the sale of the property) is waived.
As far as #1, this means that no one can just snatch your home when you are not looking – even though you may be behind. In almost all cases, should a lis pendens be filed, you should have time to respond and to sell your property, if that is your best option. If you’ve waited til the zero hour, even then the short sale facilitator can often negotiate more time by letting them know that there is a viable offer on the property.
As far as #2, in MOST cases the deficiency judgement is waived. There are a few exceptions for some home equity loans, for instance, or for a Freddie Mac or Fannie Mae loan with a second mortgage, but these are in the minority. A title company with a savvy negotiator (called facilitator) will know which lending institutions will allow what and work with them to get you the best possible outcome. The short sale process has been taped and most title company facilitators know what they’re doing.
OK, so you’re behind on your payments, now what? Decide what you want to do. Will selling your home short get you out from under the debt and allow you to move where you need to go? If so, call a realtor and if they have a good, experienced title company that can “facilitate” the sale I’d go with them. Or…
If your situation is complicated and you simply want to call a lawyer, make sure to ask them who, specifically, in the firm, will be handling your case. Will they be reachable by phone and call back? Will they make themselves available to review your documents as the sale proceeds through the closing process OR will they file an “affirmative action” (counter to the lis pendens) with the court, thereby making the bank effectively an adversary and making it more difficult for YOU or a representative such as a title company to communicate with the bank? (please speak to a lawyer about this if you have any questions)
A short sale facilitator at the title company told me she had come across cases where the lawyer had filed documentation making it impossible for anyone else, other than that lawyer, to advance the short sale, then, when the seller fired the lawyer, they did not withdraw the actions filed through the courts and effectively stretched out the sale of the property for months beyond when it should have closed. So make sure you check this point and affirm that you or a representative will be able to speak with the bank yourself and that that lawyer will withdraw documents from the court should their status with you change.
The last point on this is that most title company services for handling a short sale are free if you are closing with them. A lawyer will charge a flat fee or monthly. If they charge monthly, RUN! No really, don’t even go back for your wallet! The longer that sale is dragged out, the more it will cost YOU and the less likely it is to close! Either way you or your potential buyer will need to pay but, speaking from a buyer’s viewpoint, a $1500 charge to the buyer on top of the purchase price of a home and closing costs is not a great incentive!
To sum it up, in Florida we use title companies to close our real estate transactions. This is what they do all the time, and most of them are really good at it. Some of these title companies are owned by lawyers and that’s great, but a law firm that doesn’t specialize in “closings” is usually not nearly as experienced as a title company and using one can sometimes lead to complications that needn’t be there, or worse slow the sale. So check with a realtor, who will put you in touch with a title company, who can handle the process at no extra charge. Find out if you qualify for any benefit programs if you sell short, (and by all means speak with your accountant beforehand) and then, if you’d still like to speak with a lawyer, follow the above guidelines and you should be all set.