This last year has hit our country hard. A lot of good people who are doing their best have found themselves in bad situations. When your home has lost its value; you’re struggling to keep up with the payments; and it seems like you’ll never catch up on your mortgage, it might be time to consider a short sale on the home.
What Is a Short Sale?
A short sale is a way of getting rid of a home when there is no hope of paying it off. It is a deal you make with the lender so that they can get something back for the property. You find a buyer and sell the property for whatever you can get. Otherwise, the lender can expect to get nothing back and lose a lot of money.
A short sale is almost always a better option than a foreclosure for homeowners. Whereas a foreclosure is forced upon the homeowner, people actively choose to take part in a short sale. After a short sale, you may have to wait up to two years to be eligible for another mortgage, but a foreclosure can have you waiting as long as seven years.
Certain conditions must be met for a short sale to go through. First, the value of the home needs to be less than what is left on the mortgage. When there is a drop in the market, home prices go down, but the mortgage stays the same. The bank still wants their money back. In a short sale, it must be demonstrated that there is such a great imbalance between the value and the mortgage, the best option is to get what you can and take the loss.
Next, the owner has to show that they can’t catch up with the payments. They are so far behind that, again, taking a loss is going to be better than waiting for things to get better.
In a short sale, you first make a deal and draw up a plan. The seller gets with a real estate agent, and they try to find a buyer. The buyer agrees to the specifics of the short sale plan, and then the plan goes to the lender. This is where the process slows way down.
Obviously, lenders don’t want to lose money on their deals. When it comes to a short sale, they’re going to investigate as many alternatives as possible to get as much money back on the home as they can. When you’re trying to sell your home in a short sale, expect to wait.
The next step is for the lender to respond to the offer, but they don’t even have to do that. They can just stay silent and ignore you. When they do respond, it will be with a simple “yes” or “no,” or they will try to negotiate. At this point, they are bargaining with the potential buyer, not with the seller. The lender will have final say in the deal.
Should I Hire a Lawyer for a Short Sale?
The short answer to the question – “Do I need a lawyer for a short sale?” – is no. This is a process that can be handled along with a real estate agent. However, should you hire a lawyer? Yes, it would definitely be helpful to have an experienced law professional involved.
First off, real estate agents are very capable people. They know the rules of real estate, and they know how to push things along and avoid pitfalls. However, a real estate agent’s main motivation is to sell homes. They are certainly interested in making sure everyone is playing it safe during that process. Once the house is sold, however, their involvement is over. No matter how competent and well-intentioned they are, the agent might just be unaware of specific legal intricacies. They might not even know when they’re setting someone up for trouble.
After the house is sold, and the real estate agent is gone, there could still be issues to manage. Lenders can still file a deficiency judgment against you. A deficiency judgment is when the lender tries to recoup the loss from the short sale. People caught in a deficiency judgment can have parts of their wages automatically removed or have banks use their money to make payments. Taxes can also be affected by a short sale, even when the lender leaves the matter alone.
An experienced attorney is familiar with the law as it pertains to short sales. They can help avoid potential trouble and represent you if trouble comes. They can guide you throughout the process and advocate for you, using their understanding and know-how to keep an eye on anyone with bad intentions.
We are here to answer your questions about a short sale during a risk-free consultation. Call us at (321) 320-6088 or contact us online.