Many homeowners have heard the term “short sale,” but don’t really know what it means. A short sale is basicall or texty a bank agreeing to accept less than the amount owed on a mortgage in exchange for avoiding foreclosure. As a result of the economic downturn of 2008, impacting both the housing market and economy, short sales have become part of the public consciousness. In order to have a short sale, you need to qualify; specificall or texty your home has to be worth less than you owe on it. Also, proof of actual financial hardship is necessary, evidence including a decrease in wages, loss of job, medical bills, divorce, etc. are all legitimate.
There are many myths and misconceptions about short sales, one of which is that banks do not want to participate in a short sale. Most banks would rather have a short sale than a foreclosure, simply because foreclosures take time and money away from the bank. A short sale saves both time and money for the bank. Presently, banks have more homes slated for foreclosure than ever before, and don’t want anymore. Qualifying for a short sale is easier than most homeowners think.
Also, short sales are much more common than people think; presently they are increasing yearly due to the present economics affecting millions of Americans. Short sales are occurring in every housing market, not necessarily limited to any income bracket. A short sale is a helpful tool for both borrowers and lenders. Even though the short sale process consumes time, the problem why many short sales are denied is because many real estate agents don’t understand the proper procedures to be follows. An experienced real estate agent or foreclosure attorney will know what to do.
Short sales should not cost a homeowner any money out of pocket; in fact many homeowners can pocket a small amount of cash after the deal is done. A short sale can put you in a better position prior to the deal being done. This is because many short sale programs have a financial incentive for homeowners as long as they are in their primary residence. Sellers of property shouldn’t have to pay for short sale costs. Also, in many communities there are non-profit agencies and HUD counselors who can guide you with the various options for foreclosure. One potential cost to be taken into consideration is that the bank could refuse to release you from a deficiency judgment after the short sale.
Remember that the farther a homeowner is behind on payments, the more difficult it becomes to get a short sale approved. This is because the bank is deterred from a short sale because the farther along it gets in foreclosure, the more money it was spent. The sooner you start the short sale process, the better; waiting too long can hinder and even cause you to lose the ability to perform a short sale.
Some people believe that just because they have been sent a foreclosure notice, they can’t go forward and perform a short sale. The timeline and specifics vary from state to state, so make sure to contact a foreclosure defense attorney in order to find out in your jurisdiction what the law is. However, the longer a homeowner waits, and the closer you get to foreclosure, the fewer options you will have. Also, just because you have been denied for a loan modification doesn’t mean the short sale will be denied. These are different in approval and denial. Also, just because you go through with a short sale doesn’t mean you can’t buy a house for a significant time. The time to purchase another home depends upon your credit rating and financial situation.
Please note, that short sales may result in debt forgiveness which may lead to tax consequences, this may be the only con to the pros.
If you or a loved one is facing foreclosure or contemplating a short sale, please contact Attorney Theresa Rose DeGray at Consumer Legal Services, LLC, a Connecticut foreclosure defense law firm to find out your legal rights and various options to best proceed.