Short Sale Lawyer
Financial trouble can come from mortgage payments that are no longer affordable. A loss of income or a sudden family hardship can result in falling behind on mortgage payments. When you are behind on a mortgage bankruptcy can sometimes be avoided by working directly with the bank to come to a solution. Mortgage servicing companies often refer to this as “loss mitigation”, meaning that they will take efforts to work with you to minimize the money they will lose should a foreclosure occur. Short Sales are one of those options.
What is a Short Sale?
A short sale is an agreement with the bank where you will sell the your property to a third party and the bank will agree to take less than what is owed on the mortgage. The mortgage company then forgives the debt that was remaining. It is a solution when your property is worth less than what is owed.
There are alternative loss mitigation solutions with mortgage companies such as loan modification agreements or deed in lieu transfers. A short sale is one option for addressing a defaulted mortgage account.
Short Sale vs. Foreclosure
A foreclosure is when a mortgage lender gets authority from a Court to sell your home after you have defaulted on the terms of your loan. When a foreclosure happens, if the home sells for less than what you owe, you can be on the hook for the remaining balance, called a “deficiency”. A short sale is a coordinated sale where you work with the lender to sell the house and make sure that you do not owe anything after the sale is complete.
Is a Short Sale Bad?
A short sale is often a better option than a foreclosure. Both will have negative effects on your credit report, but a short sale has several advantages that make it preferable to a foreclosure. The main goal of the short sale is to avoid owing your mortgage lender any money after you have lost the house. A short sale is a good option if you owe more on your home than it is worth, and you are not able to make payments on the mortgage. Additionally, if you get short sale approval from your lender then there is a chance, they may agree to a cash incentive for you as part of the sale to help you with your move. While you have the home listed and are actively trying to complete a short sale the mortgage company may suspend any foreclosure proceeding, giving you more time in the home than you would have otherwise.
What is the Process of a Short Sale?
To start a short sale, you need to list the property with a real estate brokerage and apply for the short sale with lender. Typically, this is done after you have attempted and failed to obtain a mortgage loan modification. Once you receive an offer on the property it is submitted with additional application paperwork to the lender for them to review. The lender is going to base their decision to approve based on if the offer is close to real fair market value so they will send out their own appraiser to review the property. If the offer is reasonable the deal can proceed. If the lender deems the offer to be too low the short sale will be denied. Once the short sale is approved the real estate transaction will be much like any other however, the lender will have to approve the final closing paperwork. It is a difficult process because of the short period in which to get final approval of that paperwork. Short sales are complicated, so it is best to consult with an attorney about your options.