We like to believe that when we buy a house it will be a sound investment. Due to a variety of reasons, including declining market values, loss of employment, or acquiring new debt, many owners find themselves in situations where they need to sell their property for less than they owe on their mortgage. This is called a short sale. Whether you find yourself on the selling or buying end of a short sale, it is crucial to know the basics of the deal but also when to call an attorney.
Short Sale Basics
When it comes down to it, buying or selling a short sale home is a complicated process for all involved. One thing many do not understand is that a short sale is not the same as a foreclosure. It is also essential to understand that short sales are neither an easy way out for the seller or the promise of a great deal for the buyer.
Step One: Discussion
To start the process, the seller needs to contact their lender to see if a short sale is possible and prove they cannot pay their mortgage and do not have assets that will allow them to catch up.
Step Two: List & Sale
The seller will then hire a real estate agent to put the property on the market. Interested buyers will enter a sales contract that requires the lender’s approval.
Step Three: Lender Review
After submitting the offer to your lender, they can:
- Not respond to your offer
- Reject your offer
- Reject your offer and outline terms
- Accept your offer
Step Four: Buyer Review
Depending on the lender’s response, the buyer and seller review the proposed contract and negotiate, agree to, or reject its terms.
Step Five: Approval
If the buyer approves of the final contract, the short sale closes and the buyer takes control of the home. Generally, any sale proceeds paid by the buyer go to the lender to forgive the seller of their mortgage.
When To Call An Attorney
No matter if you are buying or selling the home, if you are unable to conduct every step of a short sale correctly, you may end up with the short end of the stick. When both parties consult a short sale attorney, they can assure that the steps of buying and selling are navigated correctly and efficiently.
Here are some of the many benefits of calling a short sale attorney:
Even with all the access we have to legal resources through the internet, nothing compares to advice and counseling from an actual lawyer trained in the matter. While we should trust our real estate agent, many do not realize that it is illegal for them to give legal advice.
Short sales exist to release the seller from their mortgage by accepting a lower sales price but that doesn’t mean an automatic release of personal liability. If this is the case, the lender can attempt to collect the dunpaid balance by obtaining a “deficiency judgment”, which may be enforced by garnishing the seller’s wages or even their bank accounts. Attorneys can negotiate and execute contracts and approvals that are sure to include protection of the seller from any such deficiency judgment.
Banks do not like losing money. That is why so many are wary of short sales. To recoup as much of the loan as possible, they will take a close look at any of the seller’s financial statements including, tax records, assets, bank accounts, and stocks. Retaining an attorney makes sure the contract protects those other assets from having to contribute to the closing.
Before you decide to sell your home in a short sale, it is important to understand that the process can be long and complicated as it comes down to what the lender is willing to accept. To make it less convoluted, you should call an experienced short sale attorney like those at the Law Offices of Gary I. Handin. Call us today at (954) 796-9600 or toll-free at 1 (877) 815-1560 to schedule an appointment!