What is a short sale?

A “short sale” is a term to define a deal where the sale price of the property will not be adequate to generate proceeds to pay off the current loan or mortgages, and where the lender(s) approves to accept less than full payoff.

What is a short sale negotiator?

A short sale negotiator is somebody who offers support in negotiating with the lender on the behalf of sellers. The aim is to persuade the lender to receive less than the debt amount on the mortgage(s). There are presently numerous deviations of the term “short sale negotiator.” These are just a few of the terms which exist and are not inclusive loss mitigation practitioners, foreclosure rescue negotiators, debt negotiator, debt resolution experts, short sale processors short sale expediters and  short sale coordinators.

Are there any additional requirements that a short sale negotiator or a debt management company must follow in Oregon?

This applies to debt settlement companies, loan modifiers, and short sale negotiators. Loan modification is defined as adjusting or offering to modify terms and conditions of a current loan or obligation. The law needs debt management organizations to provide consumers with detailed disclosures and written contracts, honor a three-day right of cancellation, evaluate whether the proposed services will benefit the consumer, and post a $25,000 surety bond. The bill also prohibits misleading advertising and limits the fees that may be charged for short sales and all other types of debt management services.

How is a short sale negotiator different from a foreclosure consultant?

Foreclosure consultants help an individual stay in their home, typically by working with the lender to reduce monthly loan installments. Short sale negotiators involve in activities aimed to sale the home. Helping a consumer stay in their home, with changes to their mortgage, is not a professional real estate activity and such activities must comply with the requirements of HB 3630. If a foreclosure consultant decides a short sale is the best resolution for the consumer, the consultant may not participate in the short sale negotiations or transactions unless they are properly licensed as a mortgage banker, a mortgage broker, or a real estate broker.

Can a buyer’s agent negotiate with the seller’s lender in the short sale transaction?

Consumers who are selling their home are, by the very nature of their ownership interest, able to negotiate with the lender as a matter of right. However, a seller may not be comfortable with negotiating the transaction and may want to have someone with more knowledge and experience performing these functions. Most lenders will negotiate with someone other than the seller if there has been a signed, written authorization for release of information. Ideally, one person should be the contact for the negotiation phase.

What sort of precautions should a real estate licensee take when handling a short sale transaction?

A short sale is not a normal real estate transaction. Customary timelines for offer and acceptance associated with regular sales vary from lender to lender when dealing with short sales. Lenders have their own procedures that they follow. It’s up to the licensee to be familiar with the unique procedures of the particular lender in the transaction.

Will a seller be responsible for paying the amount of debt forgiven?

Some elements of the short sale, if not properly addressed BEFORE closing, can survive the transaction. One such crucial item is the ultimate responsibility for the debt that is forgiven. In some instances, the lender could pursue a deficiency judgment if forgiveness of the debt and all recourse was not negotiated prior to closing. Also, there may be tax consequences for the seller.

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