Today more than ever it is crucial not just to understand the ways in which the legal and real estate professions overlap but necessary to have a more complex understanding. In this continued Pandemic Era, real estate agents and attorneys benefit from having a better understanding of how the other profession works and how to effectively communicate with each other. The importance of these two professions interacting in a meaningful way is highlighted in the world of foreclosure and distressed properties.

Foreclosure Alternatives & Loss Mitigation

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Many may feel hopeless once the word “foreclosure” is brought up. However, just because an individual is facing foreclosure does not mean final judgment of foreclosure is the only option. Individuals who are in pre-foreclosure, defending a foreclosure action, or even post-final judgment, may still avoid a foreclosure judgment on their record by engaging in loss mitigation or other foreclosure alternatives including both retention and non-retention options.

Individuals who wish to remain in the property (retention) and avoid foreclosure may choose to submit a loan modification application, pay off the property in full or at a discounted rate, or reinstate (make current) the loan. For those persons seeking to unload the property, they may request review for a deed-in-lieu, short sale or regular sale to determine which would be suitable under the circumstances.

The Short Sale Process

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A short sale is a sale of the property for less than the amount owed on the loan. This provides borrowers who do not want to or cannot afford to retain the property an option to sell the property and avoid foreclosure. It is also a terrific opportunity for buyers to purchase properties they may not otherwise afford. However, it is important to note, buyers purchase these properties “as is” and the short sale process can be lengthy.

As a Real Estate Agent, it is important to understand how short sales work and help guide your clients through the process. Mastering the short sale process can enable you to target a niche in the market.

What Real Estate Agents Should Know When Representing Sellers

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1. Obtain a signed third-party authorization from your client allowing you to speak directly to BOTH the bank/servicer and their attorney.
2. Provide the bank/servicer’s attorney the signed third-party authorization and request a payoff statement.
3. Request the bank/servicer’s short sale application package from the attorney’s loss mitigation specialist.
4. Sit with your client or have your client sit with their attorney to go over what is required. Ensure each page is completed, signed, initialed, dated, etc.
5. Once your client confirms a complete package, submit the package to the bank/servicer’s attorney who will provide it to the bank/servicer for review.
6. Once the short sale is approved, follow your normal protocols for the sale.
7. Once the sale closes the bank/servicer will send their attorney “close and bill” instructions to have the case dismissed.

What Real Estate Agents Should Know When Representing Buyers

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• The bank/servicer likely will not speak to you. They will only speak to an authorized representative of the borrower/potential seller.
• The borrower/potential seller will need to submit a financial package and loss mitigation application for short sale review.
• Your client, as the potential buyer, will likely need to submit a written offer, proof of funds and preliminary HUD-1.
• Once submitted, a short sale package can take up to thirty days to review.
• Prior thereto, the bank will notify the borrower if the application is “facially complete”. If so, the bank will place a “hold” on their file and will not progress the foreclosure action without Court Order.
• The bank will not provide you or your client an update. The borrower must reach out to the bank for any status update.

Scarnecchia Mullin, PLLC’s “Helpful Hints” for Interacting with a Law Firm

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• Always have a copy of your signed third-party authorization on hand.
• Provide as much information to the bank or bank’s attorney as you can- including, internal file numbers, property address, borrower’s name, court case number, etc.
• Understand the time frames to avoid potential delays and frustrations.
• Develop an understanding of the Court’s free online resources, including reviewing the public docket for the foreclosure matter.
• Always be clear with your clients that you cannot and are not providing legal advice.
• Know when to seek advice of an attorney.

Allow Us to Help

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The foreclosure defense lawyers at Scarnecchia Mullin, PLLC can help counsel you and your clients in the complex world of foreclosure. After working for the banks and servicers for nearly a decade, our attorneys understand how to best navigate the foreclosure world and successfully guide our clients in meeting their financial obligations and avoiding foreclosure. Our Attorney’s understand how Real Estate Agents and foreclosure defense attorneys working together can best achieve these goals. Contact us today to set up a consultation and allow our foreclosure experts to review your case and counsel you on your options.