Sometimes when a homeowner is underwater on a home mortgage the best option
is to sell the house rather than face foreclosure. However, as a result
of the 2007 real estate crisis, many homeowners have a mortgage that is
too high for the market value of the property. As a result, selling the
home would not completely cover the amount due on the mortgage.
A sale that doesn’t cover the entire value of the mortgage is known
as a short sale. In order for a short sale to happen, the bank or mortgage
lender must agree to transfer ownership to a new buyer even though the
existing mortgage will not be fully paid. For example, if a person owns
a home with a $300,000 mortgage, but a potential buyer will only pay $200,000
for the house, then the bank must agree to accept the $100,000 deficiency
in order for the sale to go through.
It can be difficult to convince the mortgage lender to accept such a proposition.
After all, banks are not in the business of losing money. Usually, banks
will only approve short sales when the homeowner has fallen so far behind
that the bank will have to institute foreclosure proceedings. If it is
clear that the bank or mortgage lender will never be able to recover the
full value of the mortgage from the homeowner, the bank will often agree
to take at least some money from a short sale rather than risk a very
low sale price at a foreclosure auction.
Negotiating a short sale is complicated process that requires the help
of many experienced professionals. In order to set up a short sale, a
- Contact the mortgage lender and request a short sale package or other type
of proof of hardship,
- Complete the bank’s short sale package,
- Obtain approval from the bank or mortgage lender to attempt a short sale,
- Hire a real estate agent, broker, and/or attorney
- Get a price opinion letter on the fair market value of the house,
- List the house at a price the bank will likely accept,
- Find a buyer for the home,
- Submit the short sale offer to any mortgage or lien holder on the property,
- Obtain approval of the offer from the bank or mortgage company, and
- Negotiate what will happen to any deficiency from the short sale.
Because so many people and so much paperwork are involved in the short
sale process, it is not uncommon for it to take several months or even
a year to complete the short sale.
Once the short sale is approved, the homeowner may still not be free of
his or her obligations regarding the mortgage. In some circumstances,
the bank or mortgage lender will hold the former homeowner responsible
for paying off the balance between the home’s sale price and the
value of the mortgage.
Homeowner who conduct this type of sale without an attorney often do not
realize that they will still be responsible for the deficiency on the
loan. By hiring a firm like Loan Lawyers to handle your short sale, you
can rest assured that you will be fully aware of your legal responsibilities
and obligations. If our attorneys cannot convince your bank or mortgage
lender to release you from the deficiency on the mortgage, we can at least
work with you to come up with a plan to pay off the balance or file for
To learn more about short sales and your options when your home is underwater,
contact Loan Lawyers today by calling (844) FIGHT-13 (344-4813).