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Finance

What does a Short Sale Lawyer do?

By K. Kinsella
Updated May 17, 2024
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Any real estate attorney who helps homeowners and lenders reach agreement on the terms of short sale are known as a short sale lawyer. Short sales occur when a lender agrees to allow a homeowner to sell a property for less than the balance owed on the mortgage. Typically, short sales occur in places where depreciating home prices mean that mortgage debts exceed current property values.

A short sale lawyer must graduate from college or university before attending law school. Having successfully graduated from law school, a prospective short sale lawyer must pass the bar exam to become a practicing lawyer. Most short sale lawyers begin by focusing on cases related to real estate before specializing on short sale transactions. Law firms that handle real estate cases hire large numbers of law school graduates. Established real estate lawyers often leave major firms and start their own private law firms.

Lenders hire lawyers to draw up short sale agreements that specify the conditions of the sale. Laws relating to real estate transactions vary from country to country, and even among states and territories within a particular nation. Consequently, major banks hire teams of short sale lawyers who are familiar with laws in all areas that the bank operates. Lawyers normally receive a flat fee for the consultancy and document preparation necessary to complete a short sale.

Homeowners hire short sale lawyers to represent their interests during the short sale process. Lawyers representing the homeowner ensure that the all the terms and conditions of the short sale agreement are thoroughly explained to the homeowner before the sale occurs. The lawyers representing the homeowner and the lender attempt to negotiate the best possible terms for their clients, and in some instances short sales fall though when an agreement cannot be reached.

In some areas, lenders can pursue borrowers for the remainder of the mortgage debt after the short sale is executed, while in other places non-recourse laws mean that a lender cannot pursue a borrower for any portion of a debt that remains unpaid as the result of a short sale. Lawyers representing borrowers in areas with non-recourse laws ensure that the short sale contract does not include any stipulations that provide the lender with the right to bypass the non-recourse laws. Most lenders and homeowners hire a short sale lawyer prior to the home sale occurring, but sometimes lawyers are only hired after a short sale occurs as a result of a disagreement between the parties involved.

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Discussion Comments

By Terrificli — On Dec 28, 2014

@Vincenzo -- That is not necessarily true. Yes, some real estate agents do such negotiations with banks, but there are some short sale attorneys who have built careers on dealing with real estate law and those fields often include familiarity with foreclosures, short sales and things of that nature.

Here's the thing. Banks have a fleet of lawyers and folks on their side when it comes to foreclosures and short sales. If you are dealing with an institution with that kind of firepower, shouldn't you get someone who deals in property law on your side?

By Vincenzo — On Dec 27, 2014

Wait. I thought most people used real estate agents to help negotiate short sales with banks. If that is true, then don't short sale lawyers mostly shuffle around paperwork or take care of details for banks?

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