When times start getting tough, property owners may find themselves turning to a short sale attorney for legal advice to prevent bankruptcy or foreclosure. But what really is a short sale, and how does it work?
What Is A Short Sale?
Although the property market has picked up since the housing market crash of 2007, many homeowners still struggle to keep up with payments on their mortgages or loans. When things become too difficult, homeowners can be forced to default on payments and eventually face foreclosure or bankruptcy. Rather than destroying their credit rating by declaring bankruptcy, distressed homeowners have the option of applying for a short sale.
When homeowners put their houses on the market, they typically advertise them at a price that will cover the cost of their mortgage. During a short sale, homeowners sell their property for less than what is owed for their mortgage. This means that they will come up ‘short’ when trying to repay their loan.
For example, a financially distressed homeowner could owe the bank $350,000 for their house. They find someone willing to purchase the house for $325,000, and ask the bank to agree to a short sale. This means that the lender involved has to agree to release the mortgage for less than what is actually owed. In this instance, the bank agrees to waive the $25,000 deficit in lieu of extended legal battles.
Why Hire A Short Sale Attorney?
When it comes to selling property, most people will think to call a real estate agent before an attorney. You wouldn’t expect an estate agent to acquit you of armed robbery or homicide, so why would you expect an attorney to be able to sell your house?
Simply put, short sales are not like normal property sales. The potential legal ramifications involved require the expertise of someone properly educated in the law surrounding short sales, foreclosure and deficiency judgments. Although you do need an estate agent to facilitate the actual sale itself, an attorney is regularly needed to provide legal advice in the following ways:
In theory, short sales sound very appealing. Can’t pay your mortgage fully? Just ask the bank to waive anything you can’t afford. In reality, however, getting a lender to waive the deficit can be particularly difficult. Lenders such as banks are not in the habit of losing money, especially when they have the resources to take struggling homeowners to court over unpaid loans. Most states allow lenders to apply for deficiency judgments against homeowners in an attempt to recover the money owed to them. If a deficiency judgment is passed, the lender is able to collect the amount owed to them through alternative means. Short sale attorneys can help their clients negotiate a waiver that nullifies the deficiency, or convince lenders to accept a lesser amount than the full deficiency required.
Short sale attorneys know all the ins and outs of foreclosures and deficits, but they also know how to negotiate with lenders. One of the major benefits of hiring a short sale attorney is their ability to present your case to a bank or lender in such a way as to make them believe that a short sale will be worth their while. An attorney’s ability to look over your finances and other personal documents is massively important, and can be the defining factor in short sale cases.
The bottom line is simple: when it comes to short sales, hiring an attorney really is your best bet. If you don’t want to actively hire an attorney, we recommend that you still schedule a consultation with one of the qualified attorneys at the Law Offices of Gary I. Handin, P.A. to answer any of your short sale questions.