Having more than one lien on a property can slow down the short sale process. If liens are going to be more than the sale proceeds, each must be separately negotiated as a short sale and there are a few additional steps and considerations to be made.

Recently, many 2nd lenders are requiring a short sale approval letter from the primary lender, prior to issuing their approval. Generally, the 2nd lender receives $3,000-$5,000 toward the balance of the mortgage, regardless of the amount owed. Each lender has their own approval process and they may delay the process. Occasionally 2nd lenders will grant complete debt forgiveness for the amount the 1st lender offers, however many times they are only willing to release the mortgage lien.

So you’ve decided not to walk away….what is your next step?

Just like medical problems and IRS notices, ignoring a problem with a property and a lender will not make it go away or get any better. In order to address the issues, you should discuss or negotiate with the lender. The negotiation is handled through the short sale process.

The first priority is to hire a licensed Realtor that will list the property for sale and aggressively market the property to identify potential buyers. Rarely will a lender discuss any settlement terms until an offer is received from a buyer. Once an offer is presented by a buyer and fully executed by all parties, the short sale “package” can be assembled and presented to the lender. The package consists of property data and financial information regarding the seller, and generally includes the following: hardship letter, 30 days of paystubs (or income statement if self-employed), 3 months of bank statements, 2 years of tax returns, a personal financial statement, listing agreement with the Realtor and a comparative market analysis prepared by the Realtor.

Distressed homeowners struggling to reach a resolution with their lender through short sale negotiation or loan modification often become frustrated and impatient with what may be a complicated and lengthy process. Borrowers may become tempted to accept defeat and simply walk away; allowing their lender to take their home through a foreclosure lawsuit.

At first glance walking away might seem easier than fighting a big bank. However, many borrowers who contemplate throwing their keys on the front step of their lender’s local branch fail to consider the post-foreclosure implications. Florida, unlike some states, allows lenders to pursue the remaining balance owed on a mortgage loan after completion of a foreclosure sale. This is known as a deficiency judgment. Deficiency judgments are awarded by the court and permit the lender to impose liens on property, levy bank accounts, and garnish wages of the borrower for up to 20 years.

Prior to investing in real property in the United States, a foreign person should explore several tax, corporate and liability concerns. All too often, investors do not consider these issues until they are prepared to sell the property. Unfortunately, that may cause the investor to incur additional tax, expense or liability, which might have been avoided with the appropriate planning prior to purchase.

Foreign real property owners are subject to certain withholding requirements when selling their U.S. property. In a real estate transaction involving a foreign seller, the Foreign Investment in Real Property Tax Act (“FIRPTA”) requires ten percent of the gross sales price be withheld from the sale proceeds received at closing. This withholding is remitted to the Internal Revenue Service as a deposit on the income tax liability generated from the sale. When the actual income tax resulting from the sale is reported on the seller’s tax return, the withholding will be applied and the seller will either remit a sum to satisfy the outstanding balance or will receive a refund of any excessive withholding.

With the goal of speeding up the short sale process, the Federal Housing Finance Agency (FHFA) recently issued minimum timelines for review and completion of both Home Affordable Foreclosure Alternative (HAFA) short sales and regular short sales. Although this initiative in no way guarantees an increase in approval of short sales, it does streamline the short sale process and seeks to reduce the short sale approval limbo that many buyers and sellers have experienced.

Beginning June 15, 2012, Fannie Mae and Freddie Mac servicers will be required to review and respond to short sale requests within 30 days of receipt of a short sale offer or completed Borrower Response Package (BRP).