Short Sale Information

Buyers:
The new short sale issue is a 1% administration fee. When buying a short sale listing you may now have to pay a 1% (of the purchase price) administration fee in addition to the sales price. The fee cannot be part of the sales price and the fee caps out at $5,000.

This is just like properties sold at auction, where in most instances, there is a 5% buyer premium in addition to the auction price. The only difference is the total purchase price at an auction includes the 5% buyer’s premium. On a Short Sale, the administration of 1% is in addition to the sales price and cannot be part of the loan amount.

On a typical sale in the Inland Empire, you might have a FHA loan with 3.5% down payment, plus impounds for taxes and insurance, and your share of closing costs for such things as escrow fees, title fees, pre-paid interest, etc. Now, possibly a 1% administration fee, if it is a Short Sale.

Sellers:
Short sales work best when the existing loans were at the time of purchase. These loans are seller protected in California. The lender agrees that the only security for the loan is the property. However, once you refinance, you lose your “purchase money” status and in some instances the lender can collect moneys as a result of the non “purchase money” loan.

On another note, if you are a seller in a short sale with an equity line of credit or a cash out second loan that was taken out after the original purchase loan was completed. The lender may require that you pay or make arrangements to pay on the 2nd. It is important that you read and understand the agreement between the servicing company and yourself.


If you have more questions about Short Sales, consult your tax or legal advisor.