Short Sale Negotiations

By: Timothy McFarlin | Published: April 5th, 2010 | Category: Short Sales

A short sale negotiator is a person hired by a home seller to facilitate a short sale between the seller and their lender.  A short sale means that the lender is willing to accept less than the amount owed on the loan so the owner may sell without equity.

A short sale negotiation can be a complex and drawn out task.  Having someone with experience in short sale negotiations is ideal for the client trying to reach a favorable mortgage resolution.  A trained short sale negotiator or short sale attorney can help their client by refuting bank claims of current market trends and values and negotiating for more than the client expected.  He or she will also be able to send back or renegotiate excessive demands from the lender.  A negotiator or attorney working on the side of the home owner will be a valuable resource to keep liability down.  The short sale negotiator can also play a big part in convincing the bank to consider a short sale in the first place.

A person authorized to negotiate contracts on behalf of others may be appointed to handle short sale negotiations.  While many real estate agents and other negotiation companies are currently attempting short sales, a short sale attorney typically both has the best chance of success, and can properly analyze the terms and conditions of any document the lender requires the borrower to sign.  Only an attorney can give legal advice, a short sale negotiator or real estate agent may not give legal advice.  Such conduct is considered the unauthorized practice of law and is illegal in all states.

The fee structure for short sale negotiators can vary.  Most non-attorney short sale negotiators work for real estate agents and get paid only upon the short sale closing.  This may sound like the best arrangement for a borrower as it does not cost money out of pocket, but in reality, this is a dangerous arrangement as it creates an incentive for the agent and negotiator to close the deal at all costs, whether it is truly the best thing for a borrower or not.  Often times a lender will include language in the short sale approval which allows them to pursue the borrower for money damages after the short sale closes.  Obviously, this type of arrangement is not in the borrower’s best interest.  Of course the real estate agent and short sale negotiator will downplay this obvious problem in order to get their fee even when it is to the detriment of the borrower.

A better way for the borrower to address the mortgage loan balance shortfall and complete a short sale may be to hire a short sale attorney, rather than a non-attorney short sale negotiator.  Only an attorney can give legal advice, analyze transaction and advise the client on the terms of the lenders conditional short sale approval.  A short sale negotiator cannot, by law, give legal advice.  Although most short sale attorneys charge clients for their time, a short sale attorney will provide straightforward legal advice and advise the client on what is in their best interest.  When lenders don’t provide favorable terms and conditions, often times not completing the short sale is actually better for the client than going through with a bad deal.  Borrowers can actually make themselves much worse off by voluntarily agreeing to a promissory note or deficiency when one would not otherwise exist by operation of law.

A short sale negotiation is far too important to leave in the hands of an untrained individual.  To ensure the highest amount of success possible for their clients, a short sale negotiator should be knowledgeable of the banking and real estate industries and willing to confront bank representatives aggressively.  A borrower should make sure that they working with a true professional because it is easy to make yourself worse off through a short sale by not working with a knowledgeable representative.  A person can decide to work with a non-attorney during a short sale negotiation, but an experienced attorney can have far better success in a much shorter amount of time than a short sale negotiator or real estate agent pushing to close deals and make commission.

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