10 Oct How Much does a Short Sale Cost?
The simple answer is that a short sale costs nothing. Most residential real estate attorneys do not charge a consultation fee. I do not charge a consultation fee! For legal fees I rely on the bank to absorb my fees in the short sale payoff to the bank.
That said, the more complicated answer regarding the costs of a short sale is that the cost of the legal fees and all other fees related to the sale (Realtor Fees, outstanding utilities, etc) are all added to the deficiency. The deficiency is the difference between the total amount that the lender(s) is owed and the amount that they receive through the short payoff. If the lender is taking less money in order that a Realtor or attorney fee may be paid, then the deficiency will increase by the cost of these services. So, the important question is: What will happen with the deficiency after the sale?
There are several possibilities as to what will happen with a short sale deficiency:
1. The lender may reserve their right to pursue the deficiency.
2. The lender may demand that a portion of the deficiency is paid in cash or through a personal note.
3. The lender may forgive the entire deficiency and settle the account as paid.
The final cost to continue is the tax consequence of a Short Sale. The Federal tax may not be an issue, depending upon whether or not the mortgage was a purchase money mortgage used to purchase a primary residence. However, the State tax must be paid. There is no automatic State exemption in Massachusetts. this is why I always recommend that a short seller consult with an accountant before committing to a short sale!