Select The Right Closing Attorney or Escrow
Closing a short sale takes more talent than closing a regular sale, so it is critically important that you use a closing attorney or escrow officer who has experience with the requirements of a short sale.
Angie Turner is one of the best paralegals in North Carolina. She is with Clifton and Singer, one of Raleigh’s premier firms in the field of real estate law. I asked her to write about the difference between closing a short sale and a regular sale. While she follows the terminology in North Carolina with closing attorneys, you can substitute the term escrow officer for closing attorney in other parts of America. Here is what she has to say:
Short sale transactions are very different from standard closings. They require real estate professionals that understand the process, that can negotiate with the bank, and that can coordinate with multiple parties to complete the transaction. One of the important parts of the short sale package that is submitted for the lender’s review is a draft HUD statement, in other areas called a closing statement. The lender will determine whether to accept the short sale based upon the amount of the payment to the lender shown on the draft HUD statement.
The closing attorney’s responsibility is to provide fair and upfront pricing for the seller’s side of the draft HUD statement. While the pricing for the seller’s side of the draft HUD statement is estimated, the estimates must be as accurate as possible. Estimating the seller’s fees is often difficult due to the lack of a closing date and other variables. If the seller or closing attorney is in doubt about the estimated fee, the closing attorney’s office should err on the high side because the bank will be unwilling to accept a higher fee later. In other words, if the bank settles for a certain amount as a full payoff of their loan, you do not want to go back to them with less money being paid to the bank than what was shown on the draft HUD statement.
The closing attorney?s office is also responsible for making changes to the draft HUD statement and submitting it to the bank and Realtor. Often the HUD statement will be changed 15-20 times before the bank agrees to the short sale.
Once the negations are completed, the closing documents are signed, and the keys have changed hands, the closing attorney?s job is far from over. In order for the seller to give good title to the buyer, the deed of trust securing the loan must be canceled of record. The
loan(s) paid off in a short sale transaction have numerous stipulations and precise instructions that must be followed exactly before the bank is willing to cancel its deed of trust. Since the bank is taking less that a full payoff, they are even more difficult on the requirements for eliminating the lien on the property that was sold. Therefore, after closing, the closing attorney is still working with the bank and meeting its requirements to ensure that the deed of trust is successfully cancelled.
Due to the additional requirements in completing a short sale, you will need to choose a closing attorney that is knowledgeable in short sale transactions. You need a firm that is willing and able to work with you and the bank before you have even scheduled a closing. For example, even before you have a sale approved, you will need to have a draft HUD statement to estimate the proceeds to the bank. Also, you need a firm that will follow through with the numerous detailed tasks that occur after closing.
Thank you, Angie, for your explanation of the requirements for closing short sales. If you are closing a short sale with me, the closing will be at Clifton and Singer to avoid the disasters that can occur with firm that has not done many, many short sales. My Short Sale Addendum includes a provision that the closing will be with Clifton and Singer because it protects all of the parties to the sale.