When Is Title Work Done During a Short Sale?

Jun 14, 2011

Completing a real estate short sale is no easy task, for either real estate agents or home sellers. But as in all real estate transactions, the buyers in such sales must obtain title insurance and pay for a title search that will ensure that the home they are buying has no liens against it.

The Short Sale Option

Short sales become popular in markets where home values have fallen. That's because in such a sale, mortgage lenders agree to allow home sellers to sell their residences for less than they owe on their mortgage loans. Lenders lose money in short sales. But they approve them when homeowners have fallen behind in their mortgage payments and can't sell their homes quickly. Lenders often determine that losing some money in a short sale is a smarter move than taking on the time, expense and hassle of foreclosing on a property and then trying to sell it.

The Short Sale Process

The short sale process works much like any typical real estate transaction, except for one crucial fact: Mortgage lenders must approve every offer that home sellers attract for their residences. If lenders feel the offer is too far below market value, they can reject the offer. Home sellers will then have to find another buyer or bring their own cash to the table so their lenders won't lose as much money on the transaction. Once lenders approve a short sale offer, though, the real estate closing operates in the same manner as any home sale. This means that title insurance is involved.

Title Insurance

With title insurance and a title search -- both of which home buyers pay for during the real estate closing -- title officials make sure that buyers are purchasing a residence that has no liens against it. Title insurance workers also make sure there aren't any clerical errors involved in the housing deed. In a short sale, tile insurance officials will do this too. They'll just wait until an official closing date is scheduled for the seller to transfer ownership of the property to the buyer. The mortgage companies for the buyer and the seller will set this date after the seller's mortgage lender gives its approval for a short sale offer.

Closing the Transaction

If a title search finds that a property is free of any liens, the buyers and sellers can officially close their short sale. They'll usually do this at a closing scheduled at the office of the title insurance company. At this time, the buyers will sign their mortgage note and settlement statement, and pay any closing costs -- including fees for title work -- that are involved in closing the real estate transaction.


Read More: by Don Rafner, Demand Media, When Is Title Work Done During a Short Sale?

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