Below-the-Radar Short-Sale Issues

You could end up having to pay those outstanding incidentals if you don't work out responsibility for the seller's lenders with buyers ahead of time.

Incidental fees. In short-sale transactions, the seller’s lender typically won’t pay many of the outstanding incidental costs at closing such as title and survey fees, unpaid water bills, and overnight document delivery fees. So, you could end up having to pay those if you don’t work out responsibility for them with buyers ahead of time.



Home inspections. Given the uncertainty of obtaining the lender’s OK, it’s not unusual for buyers to want to delay ordering the home inspection until after lender approval. But such a delay can hurt buyers if the inspection turns up something they don’t like. They need to be comfortable with the condition of the house before seeking lender approval for the deal.



Contingencies. Buyers face the same contingency issues that they do in any other transaction. They need to be sure they can get financing before asking the seller’s lender to approve the deal; otherwise, after their lengthy wait for the seller’s lender, the deal might still collapse.



Client communications. During the approval process, weeks can go by with no contact from the seller’s lender. You should remain in regular contact with buyers to tell them what you’re doing even when you’re hearing nothing from the lender. If the lender eventually says no to the deal, your clients might wonder if you did all you could during the process. By checking in regularly, you signal to buyers that you’re on the job.



Distressed HOAs. Look carefully at the financial condition of the home owners’ association because lenders can throw your buyer for a loop if they refuse to make a loan for a home with a distressed HOA. From lenders’ perspective, there’s a risk of deferred maintenance and repairs and a risk of future dues assessment increases. Review the HOA’s financials with an accounting specialist, and look for elevated spending by the HOA on attorney fees.



Source: Kevin Coyne, The Coyne Law Firm, Oakbrook Terrace, Ill