How Can I Help?

I have built a relationship with an attorney who handles theentire short sale process for sellers who are in financial distress with theirhome.  Most homeowners in need of anattorney ask,  "How can I afford to pay for anattorney if I'm behind on my mortgage?"  Well, the answer is quitesimple. YOU DON'T.  With the agreement Ihave in place with this attorney, he charges the bank a flat flee to negotiatethe short sale settlement terms.  And TheBank Pays Him.  The last thing the bankwants to do is take ownership of another property.  And they realize that without my attorneys help, most likely the homeowner is going to let the bank foreclose on theproperty.  It becomes a win-win situationfor all parties involved.  But it's important you know exactly what a short sale is and how the process ishandled.  So I've compiled a detailedexplanation from various sources that explain what a short sale is and how itis handled.  Once you have read the entire page,call me so we can set up an appointment for us to get together and go over inperson what needs to be done to get the short sale process started.

Whatis a Short Sale?

A short sale is a sale of real estate in which the saleproceeds fall short of the balance owed on the property's loan. It often occurswhen a borrower cannot pay the mortgage loan on their property, but the lenderdecides that selling the property at a moderate loss is better than pressingthe borrower. Both parties consent to the short sale process, because it allowsthem to avoid foreclosure, which involves hefty fees for the bank andpoorer credit report outcomes for the borrowers. This agreement, however, doesnot necessarily release the borrower from the obligation to pay the remainingbalance of the loan, known as the deficiency.

Process

In a short sale, the bank or mortgage lender agrees todiscount a loan balance because of an economic or financial hardship on thepart of the borrower. The home owner/debtor sells the mortgaged property forless than the outstanding balance of the loan, and turns over the proceeds ofthe sale to the lender. Neither side is "doing the other a favor;" ashort sale is simply the most economical solution to a problem. Banks willincur a smaller financial loss than would result from foreclosure or continuednon-payment. Borrowers are able to mitigate damage to their credit history, andpartially control the debt. A short sale is typically faster and less expensivethan a foreclosure. It does not extinguish the remaining balance unlesssettlement is clearly indicated on the acceptance of offer.

Lenders may accept short sale offers or requests for shortsales even if a Notice of Default has not been issued or recorded with thelocality where the property is located. Given the unprecedented andoverwhelming number of losses that mortgage lenders have suffered from the 2009foreclosure crisis, they are now more willing to accept short sales than everbefore. This presents an opportunity for "under-water" borrowers whoowe more on their mortgage than their property is worth and are having troubleselling to avoid foreclosure as a result.

Additional parties

Multiple levels of approvals and conditions are very commonwith short sales. Junior lien-holders - such as second mortgages, HELOClenders, and HOA (special assessment liens) - may need to approve the shortsale. Frequent objectors to short sales include tax lien holders (income, estateor corporate franchise tax - as opposed to real property taxes, which havepriority even when unrecorded) and mechanic's lien holders. It is possible forjunior lien holders to prevent the short sale. If the lender required mortgageinsurance on the loan, the insurer will likely also be party to negotiations asthey may be asked to pay out a claim to offset the lender's loss in the shortsale. The wide array of parties, parameters and processes involved in a shortsale makes it a relatively complex and highly specialized type of real estatetransaction. Not surprisingly, short sale deals have a high failure rate andoften do not close in time to prevent foreclosure when they are not handled bya knowledgeable and experienced professional.

Consent

Short sales are different from foreclosures in that aforeclosure is forced by a lender, whereas both lender and borrower consent toa short sale. However, this consent may change at any time, and negotiationsmay be ongoing between the lender and borrower even while the short sale is onthe market. The borrower may decide to remain and refinance their house, orbecome obstinate and force foreclosure. The bank may renege as well if theydecide to stick with the current borrower, or if they disapprove of the saleprice. Any short sale contract includes a contingency where the bank mustapprove the sale.

Credit implications

Short sales are a type of settlement, and they adverselyaffect a person's credit report. The negative impact may be less than aforeclosure, but in some cases the effect is the same. Like all entries exceptfor bankruptcy, short sales do not show on a credit report according to theDistressed Property Institute. The credit will restore within 18 months or so.Depending upon other credit information, it is possible to obtain anothermortgage 1-3 years after a short sale, or less if the borrower is current atthe time of the sale.

While lenders sometimes forgive the remaining loan balance,other lien-holders likely will not. Further, it is possible for a lender toomit updating mortgage balances zero balance after a short sale. However,willfully misrepresenting information on a credit report can constitute libelin some jurisdictions, and lenders may be sued in civil court for engaging inthis behavior.