Short Sales Louisville, KY

Short sales have become a common occurrence in the Louisville, KY real estate market.  A Louisville, KY short sale is defined as when a lender accepts a lesser amount of money than what is currently owed by the borrower when the home is sold.  Hence, the home is sold at a price short of what is actually owed.  A short sale has its benefits in the real estate market because it can help a seller who is in financial trouble sell a home that otherwise would go to foreclosure, it helps the buyer purchase the home at a price more inline with the current market, and it removes a non-performing loan from the books of the financial institution.

The first step to a short sale is the seller decides to sell the home and lists it with a real estate agent.  I know of no mortgage lender who will do a short sale on a home that has not been listed for sale and exposed to the broader real estate market.  Lenders insist on this step because it helps ensure that they are receiving the maximum market price for the home when it does sell.  The real estate agent should price the home according to the current market trends, and should make regular price reductions until an offer is obtained.

The next step involves the seller completing a short sale package that can be provided by a short sale attorney or negotiator.  This will include an extensive financial disclosure including tax returns, plus a hardship letter explaining the nature of and need for the short sale.  This short sale package can be quite detailed and must be completed accurately and honestly.  If the lender detects fraud, or if they detect even honest inconsistencies, they will reject the short sale and could possibly have legal recourse against the seller.  I would strongly recommend coordinating the submission of this package with your real estate agent, a short sale attorney and any offers the seller receives from buyers.

From the current state of the market, lender's will only approve a short sale if a signed contract on the property exists.  The final contract will need to state that the home is sold subject to lender approval of the short sale.  This is where an experienced short sale attorney can navigate the bank's approval process and decrease the period of time prior to approval.  Once the lender has received the properly completed short sale package and a signed purchase agreement has been entered, the bank will assess the financial hardship and whether the offer on the property is within a current fair market value determined by a real estate agent hired by the bank.   A further step involves my favorite part of the short sale process...  Waiting... You wait for the bank's negotiator to render its decision and hopefully be approved by the lender.

The negotiator from the bank will review the files and go through a series of negotiations with the seller's short sale attorney.  The attorney will negotiate on the seller's behalf the best terms.  A professional short sale attorney will not charge the seller for any work done and will only get paid from the closing funds.  Of course, sellers or borrowers can attempt to complete a short sale with a bank negotiator, but because of the volume currently in the market, it is nearly impossible to complete the approval process in a timely fashion without an experienced attorney. 

Finally, after all of the waiting, phone calls, and emails, you may find yourself with an acceptance of the short sale from the lender and can move forward with the closing. If the seller has hired a short sale attorney, they will coordinate with all interested parties regarding the approval letter delivered by the bank and move to close the sale.  If the seller does get rejected, the seller or its attorney needs to discover exactly why so either the file can be resubmitted with the necessary corrections, or the seller will know for the next time what the lender is looking for in an offer.

Further, a taxable event to the seller can arise from a short sale transaction due to forgiveness of debt income arising from the balance owed on the mortgage.  Certain exemptions exist to avoid paying taxes such as whether the home sold in the short sale was the primary residence of the borrower.  A short seller will need to determine whether a taxable event will arise by discussing the possible consequences with an accountant.  An experienced attorney such as those at Hayden & Craig PLLC can provide the necessary advice to successfully conclude a short sale.

Good luck with your short sales seller, and buyers remember to be patient and reasonable as the process does take time and you are negotiating your short sale with a lender who has no personal interest in whether or not you acquire the property.