Many of our clients have asked us what options one has if they can no longer make their mortgage payments and want to avoid foreclosure. One of the few options is to consider a short sale. So, how does a short sale work?
In a short sale, a bank agrees to accept less for a home than is owed on the loan.
For example, say the house you are paying off was valued at $350,000 at the time of purchase and if the property value declined after purchase, a homeowner could still sell the property with a short sale. Once an acceptable offer is received, a qualified real esttae broker will send out a short sale package, including requested documentation to the bank that will help determine whether the house will be sold at the lower price. If approved, the bank sends out a broker or appraiser to determine the actual price of the house, and decides whether the offer on the house is fair. If the bank’s counter offer is not accepted by the buyer, the house is put back on the market with a price that the bank deems appropriate and waits for other offers. Once the bank accepts an offer, it moves on to escrow and the house is sold for less than the balance owed on the loan. If handled correctly, the seller is now free from any further payments on the deb as well as should not have additional tax liabilityt. As a result, the homeowner no longer pays an overpriced mortgage and a buyer finds the home at a today’s value. Further, the borrower avoids foreclosure and the lender avoids the costs and uncertainty of foreclosure.
Now you might be asking yourself how you can qualify for a short sale. There are three basic qualifications and each bank weighs them differently. For your best chance at qualifying for a short sale, it is best that you consult with a knowledgeable attorney and hire an experienced short sale broker. Some of the common qualifications for a short sale include:
1) You have fallen on hard times and are unable make the mortgage payments.
Examples of this include job loss, divorce, bankruptcy, medical emergency or death.
2) The mortgage is in or near default status
Meaning that mortgage payments have not been made for a period of time.
3) The home’s market value has dropped
The home is worth less than what the homeowner has to pay.
De Novo Law Firm works with brokers and sellers to help them through this difficult process. If you are considering short sale, the short sale attorneys at De Novo Law Firm can help guide you through the legal processes. If you have any questions or would like more information, please call us at (951) 801-5570.