Shortsalenurse's HAFA Blog

June 16, 2009

Short sales should only have speed bumps, not land mines!


Today I got a written request for information from someone out side of the San Diego area at Short Sale Nurse dot com.   I am going to respond here on the blog so others get to see the question and answer also.

Here is the question.  If I am buying a condo in a short sale what do I need to watch out for?   Here is what I had to say.   (This is not a complete list and you should consult with your Realtor in your situation but this is what I believe to be important.)

In most cases buying a condo is the same as buying a single family residence.  One part of the process that is very important is gathering together all of the information relative to expenses to transfer title.  The listing Realtor will normally gather this information together and give it to the lender who is going to approve the short sale.  This is done on a form called the HUD 1. (estimated closing statement)

It lists all the fees related to the sale including but not limited to the payoff of the loans, liens, taxes and closing costs like escrow title and Realtor commissions.  The lenders want these to be as accurate as possible.  They are using this as a tool to determine a sale price and if the offer being made is a good one.

One fee that I have seen over looked during the process is the Home Owners Association fee.  Many times the seller has not paid those fees for a year or more and the fee is due to the Association.  Sometimes penalties are due for a lack of payment.  Getting a demand for these fees are important.  Some Home Owners Associations also have upfront fees to provide this demand.  Sometimes the cost (fee) to prepare the statement is in the hundreds of dollars.  I saw one case where the late HOA dues were over 5 thousand dollars, this was to big an figure for the lender to overcome based upon the offer that was made.

When I am listing a property I do all I can to minimize surprises like this. Many distressed homeowners don’t have the money to pay to the Home Owners Associations and it is better to prepare for this than let it become a transaction killer.  I will try and work with the HOA to get this fee deferred until closing but it does not always work.

Many of the Homeowners Associations in San Diego will work with us on this issue but the fee structure is set in the HOA rules. 

Please visit us at Short Sale Nurse dot Com to see more about short sales and how we work as a team to aid our community through these difficult economic times.  We try an answer all the questions that are asked of us.

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