short sale
Short Sales
If your home is in jeopardy of foreclosure and a loan modification is not an option to save the home, a short sale may be the next option. A short sale is simply the sale of a home for less than the value of the mortgage owed on the property. It is no secret that most home values have declined below their original purchase value. Short Sales are a good option if the homeowner simply does not want to save their home and needs to get out from underneath the debt of the mortgage. The best part of a Short Sale for the homeowner is that if the home sells for less then the value owed to the bank, the homeowner is released from liability coupled with a release of tax liability pursuant to the 2007 mortgage forgiveness relief act.
More specifically, a short sale, also called a distress sale has significant benefit for the lender because the lender avoids the expenses and hassle of seizing a delinquent customer’s property. In addition, lenders realize that they could lose money if the borrower’s home is auctioned in a foreclosure proceeding.
To decide whether or not to accept a short sale, lenders look at various factors. Those factors are:
- Whether the seller truly has a hardship limiting his or her ability to pay the mortgage.
- Whether it would be cheaper to simply repossess and sell.
- How many other properties the lender has in default.
- Whether there are cosigners on the mortgage who can be held responsible for the balance covered on the mortgage.
Even when borrowers engage in a legitimate short sale, there is no guarantee of success. It’s difficult to have an agreement where the interests of all parties are satisfied. One has to take into account the interests of the lender, homeowner, agent, buyer and investor who held the mortgage. Also, if the husband and wife were divorcing, then both would have to agree to have a short sale. With regard to managing a short sale, it’s important that sellers review loan documents with an attorney to make an informed decision. Also, is recommended to that you hire a law firm specializing in loss mitigation to help get you through the process.
