Understanding Short Sales

Presented by John P. Bradbury – 3.0 hours

  1. What is a Short Sale (15 minutes)
    1. Short sales (a/k/a discounted payoffs) occur when:
      1. the sales proceeds of the sale of the property are insufficient to pay off the mortgage and;
      2. the lender consents to accept less than the outstanding mortgage balance, including penalties and interest, to release the lien. 
      3. The benefit to both the lender and owner is the avoidance of foreclosure or bankruptcy.
  2. Why Lenders Consent (15 minutes)
    1. Risk of the falling prices during the foreclosure process.
    2. Lenders loss reserves
      1. considerably more than the current debt outstanding
      2. renders lender with less to lend.
    3. Recourse v. Non-Recourse
    4. NYS One Act Rule – Election of Remedies
    5. Avoid bankruptcy cram down.
  3. Lender Acceptance and Terms (30 minutes)
    1. owner realize zero proceeds from sale;
    2. offer price bears some relationship to current fair market value;
    3. discussions with lender to negotiate debt forgiveness.
  4. Owner Concerns (45 minutes)
    1. Credit Implications
    2. Peace of Mind
    3. Documentation Required
    4. Tax Consequences
  5. Overview of Process (45 minutes)
    1. When to Begin
    2. Time Frame for Approval
    3. Contingencies
    4. Agent Commission
    5. Buyer Benefits & Contract Considerations
    6. Investment Property
    7. Attorney Consideration
  6. Bankruptcy Summary: (15 Minutes)
    1.  Chapter 7
      1. The Bankruptcy Estate
      2. Eligibility/Means Test
      3. Secured v. Unsecured Creditors
      4. Exempt Property/Homestead Exemption
      5. Discharging of Common Debts
    2. Chapter 13
      1. Eligibility
      2. Repayment Plan
      3. Failure to Complete Repayment Plan
  7. Treatment of Mortgage Debt Under Bankruptcy Code (15 Minutes)
    1. Chapter 7
      1. Reaffirmation
      2. Retaining Real Property without Reaffirmation
      3. Surrender
      4. Implications for non-primary residences
    2. Chapter 13
      1. Treatment of delinquent amounts
      2. Treatment of excess equity
      3. Implications for non-primary residences
      4. Credit Rating implications