Short Sale Time Saver: Remove non-institutional liens early
Short Sale Nightmares
If you are a short sale negotiator, a short sale listing or buyer’s agent, or if you are involved in a short sale transaction of any kind, I’m not sure whether you could imagine anything worse than this: five months to receive short sale approval, buyer’s loan documents are finally signed, and then you hear the unfortunate turn of phrase, “There’s a lien on the property (or against the seller) that needs to be removed before we can close.”
While I’m not a title expert, I can still advise that it is vital to order a copy of the preliminary title report on the property listed for short sale as soon as possible. Then, review the title report to be sure that all of the liens that are noted in the report are being removed and/or worked on as part of the short sale transactions.
Say, for example, that there are three mortgage loans and an HOA lien. Check in with whomever is doing the short sale processing to be sure that all of those items are being addressed with the short sale lender and are included in the proceeds of the sale.
What about non-institutional liens?
There are other kinds of liens, however, that are a matter against the individual and may not appear on the preliminary title report. These may include a child support lien, an abstract of judgment (like an unpaid credit card bill), or a federal or state tax lien. These items, if they appear when the title company (or your attorney or your escrow company) is doing their due diligence, may have an unfortunate impact on your short sale.
What short sale lender, for example, is going to be interested in paying off your seller’s unpaid child support bills?
That’s why it is so important to look into all the liens on the property as soon as possible. If you are the listing agent, have a look at the preliminary title report when you take the listing. If you are a buyer’s agent, ask for a copy once you have an offer that has been accepted by the seller.
By adhering to this practice, no party to the transaction is going to spend months and months working to get a short sale lender approval letter on a deal that may never close.
Think that this is tough to remember? Whoever first said “The devil is in the details” was probably referring to short sales.