A short sale (also called a pre-foreclosure sale) is one of your options to prevent a foreclosure on your home. To see a complete list of your options, click here and read our Free Legal Consumer Guide about Foreclosures.
And you need to explore your options with an attorney before deciding if a short sale is right for you. Contact us to schedule a free consultation.
A short sale is the type of sale you will have to do if you are upside down on your house. If the property’s sales value is not enough to pay the loan in full, the lender may allow you to sell it for less than the total debt.
A short sale is an arrangement between the owner of a home and the current mortgage lender to accept less than the total amount owed to pay off the home loan. The lender agrees to accept the amount of the sale as full payment of your debt, even thought it will be “short.”
The lender must approve a short sale in advance. They must agree to accept less than the full amount owed. You cannot force them to agree to a short sale.
This requires a negotiated agreement with the lender to accept your short sale and avoid a foreclosure on your home. The Short sale process will be long and frustrating, and you may have to make difficult last minute decisions. Therefore you need to know all your options now, so if something unexpectedly comes up at the settlement table you know what to do.
Our attorneys can explain your options in a free consultation, and are experienced in negotiating with the lender for a short sale. If you hire an attorney to do it, they know you are serious. They know that your fall back option if they do not agree to the short sale is bankruptcy.
Also, you need to know your bankruptcy options. One of the main reasons for doing a short sale is to avoid bankruptcy. However, in some cases the bankruptcy is the better option. You simply have to know those options before you take action. Click here to read our Free Legal Consumer Guide on Bankruptcy in Maryland.
You Need A Team Of Advisors
If a short sale is right for you, you are going to need more than a lawyer. You are going to need a team of consultants – a real estate agent, a tax adviser and a lawyer.
You need a realtor for a number of reasons. First, keep in mind that in a short sale you are selling your home. If you want to sell any kind of real estate, it is our strong legal advice that you hire an experienced real estate professional to do so.
In fact, you should hire a real estate professional who has extensive experience in short sales. Short sales are WAY too complicated to handle on your own.
Second, if you do not hire a realtor to actively market your house, the bank will assume you are just stalling and do not really intend on following through.
You need an accountant to avoid creating a huge tax headache. If you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable. The last thing you want to do is sell your house and think your troubles are over only to find out at tax time that you’ve gone from having a mortgage problem to having a tax problem. Therefore, you need to look at the possible tax consequences of a short sale.
The Decision Is Not Yours
If they wish to consider a short sale, the lender will analyze the facts of your particular case and determine if you are eligible to sell the home at less than the outstanding debt. If they agree, the lender accepts that shortfall as their loss. But anyone who is thinking a short sale is right for them must be aware that the ultimate decision on approval of a short sale is going to be made on the best interests of the lender. It is not easy to get the mortgage lender to agree to a short sale.
Think about it. You are asking them to take a guaranteed loss on the property. You have to provide the lender with very good reasons for taking the deal, such as avoiding the costs of foreclosure or avoiding forcing you into a bankruptcy.
In some situations, it may be better for the lender if you file for bankruptcy. If the Bankruptcy Judge forces you to file a Chapter 13 instead of a Chapter 7, the lender will sometimes get more favorable repayment terms by forcing you to file bankruptcy. It really depends on the details of your specific situation.
A short sale may be an excellent option if you cannot keep your home and want to avoid a bankruptcy. Often, mortgage debt is the one thing that ruins a person’s finances, and if they could just get rid of that excess debt they would be able to afford their other bills.
If you are considering whether or not a short sale is right for you, you should consult with an attorney to go over the details of doing one, and investigate all of your options. We offer a FREE consultation for anyone having trouble paying their mortgage who may want to investigate short sales, mortgage modifications, bankruptcy, etc.
Special Notes For The Buyer Of A Short Sale
The buyer of a property in a short sale should be aware of several key issues. The contract is usually contingent upon the agreement of the seller’s mortgage lender to accept the net proceeds of the sale as full payment for the underlying debt. This is often a long process, which can delay an anticipated settlement date, and buyers and agents should be prepared for this possibility.
Ideally, the lender pre-approved the short sale prior to advertising on a Multiple Listing Service, but the fact that the property is a short sale should be disclosed in the comments section of the listing. The sales contract should also include a third party addendum, outlining that the contract is contingent upon the agreement of the seller’s mortgagee to accept the net proceeds of the sale as full payment of the underlying outstanding debt.
As always, if you are considering a short sale, or any real estate transaction, whether you are a seller or a buyer, it is important to seek competent legal and financial professional advice. Get a consultation with an attorney, and be sure you deal with a real estate professional with experience on short sale transactions. We will be happy to recommend some good realtors with experience in short sales if a short sale is right for you.