The current real estate market presents a unique cross-roads for real estate law. John D. Rothamel, Esq. has developed focused expertise regarding an intricate specialty within the world of real estate- short sale negotiation. Learn about how Rothamel Bratton can work on your behalf, at no cost to you.

A short sale occurs when a homeowner owes more on his mortgage that the property is worth, and that homeowner is unable to make ends meet as a result of some kind of hardship (divorce, job loss, medical challenges, incarceration, etc.). When the above exists, and the homeowner is compelled to sell his home, short sales provide a favorable venue to get out from under the mortgage(s) against the property.

This scenario has become common over recent years due in large part to the declining real estate market, high job loss, and the financing that was available at the peak of the real estate market. Many homeowners are now in Foreclosure as a result of the loan products that were available between 2002 and 2006. During that time, Buyers often financed 100% of the value of the property when financing was obtained, while agreeing to loan that was interest only, or an interest rate that could adjust over time (ARM). Doing so at the highest value that the property has enjoyed, while putting little or no money down, presents a significant shortfall years later when property values are much lower and the home must be sold. The normalizing real estate market has caused property values to decline, which in turn magnifies the impact on a homeowner.

Why should a Seller consider a short sale?

Many homeowners that are not familiar with a short sale believe that Bankruptcy or Foreclosure are the only options. In reality, both can be avoided, which can help rebuild a favorable credit score, avoid potential default judgments, and promote the opportunity to move beyond what will hopefully be a temporary challenge in that homeowner’s life.

A short sale is an excellent opportunity for a homeowner who can no longer afford his monthly mortgage payments, owes more than the property is worth, and has a Buyer who is ready, willing and able to purchase the property.

A short sale is typically preferable to a Foreclosure or Bankruptcy, as the impact on a homeowner’s credit report is generally less significant. Recent reports have indicated that Foreclosure and Deed-in-Lieu of Foreclosure may result in a hit on the homeowner’s credit of approximately 250 to 300 points. Bankruptcy can be up to the same, and oftern a Foreclosure is not avoided, simply stalled. It was also reported that the affect of a short sale on a Seller’s credit is usually much less damaging and can appear as a “compromised” or “settled” status, resulting in less of a blemish on credit. With less of an impact on your credit report, it is more likely that you will be able rebuild credit in a shorter period of time.

Further, the Debt Relief Act of 2007, as expanded by the recent Emergency Economic Recovery Act of 2009, allows a tax payer to avoid capital gains for the short sale of a primary residence, which would otherwise be considered income to a homeowner and result in capital gains being owed. Investors who are short selling rental properties or second homes are advised to seek counsel from licensed C.P.A. or tax professional.

What is required for a short sale?

To begin short sale negotiations, Rothamel Bratton requires a complete short sale package, which will allow your attorney to clearly illustrate your financial picture for the short sale lender. The motivating factor for the lender to discuss a short sale is its fear of the time and expense of foreclosing upon your property. With a clear understanding of the legitimate hardship and your inability to make ends meet, the following documentation improves Rothamel Bratton’s ability to obtain favorable results:

From Seller

• Authorization Letter
• Seller’s Financial Statement (monthly budget)
• Typed Hardship Letter signed by Seller
• Two most recent pay stubs
• Two most recent bank statements
• Two most recent Federal tax returns and W-2 forms

From Real Estate Agent

• Listing Agreement
• Broker’s Price Opinion Letter with comps
• A fully-signed copy of the Agreement of Sale
• Pre-approval letter for Buyer from a reputable mortgage lender
• Photographs/Home Inspection to support required repairs or an appraisal

Rothamel Bratton understands the challenges of dealing with a Foreclosure, and the struggles that come with divorce, job loss, and other significant hardships. As a concession to our clients, we will never charge you a fee for short sale representation. We do not charge a consultation fee, will not charge you a negotiation fee, and will not charge a fee in the event your short sale is not approved. Rothamel Bratton’s attorney fee will be paid by the Seller’s lender, from the proceeds of the sale, so we serve as a partner in the negotiations and will not receive compensation unless we are sitting next to you at a successful real estate closing.