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Understanding Short Sales

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 homeowner must:

  • 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 bankruptcy.

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).

  • ABC News
  • American Civil Liberties Union
  • CBS 4
  • CNN
  • Daily Business Review
  • Florida Trend's - Florida Legal Elite 2014
  • Florida Trend's - Florida Legal Elite 2014
  • National Association of Consumer Advocates
  • National Association of Consumer Bankruptcy Attorneys
  • NBC News
  • National Consumer Law Center
  • The New York Times
  • Avvo
  • Avvo
  • Avvo
  • Avvo
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