If you are able and willing to move, you can solve a foreclosure with a short sale. Your bank is not in the business of real estate, and so in the end does not really want to end up with a property on its hands. A short sale is essentially you and your attorney doing the work the bank would have done after the fact if they had successfully foreclosed on your property, and as such many banks are willing to accept a short sale.
The advantages for you of a short sale
Performing a short sale gives you the time and money to move, and often results in less financial penalties than if a bank had successfully foreclosed on your home. The only catch is getting a bank to agree to a short sale, which the bank takes more seriously when a foreclosure defense attorney is involved. As with any other method of handling a foreclosure, an attorney needs to be involved to prevent possible pitfalls with a short sale – both with the bank and in terms of real estate law.
What a short sale is
First, your attorney will negotiate with the bank to accept a short sale in lieu of foreclosure. Once all of the appropriate agreements are made in writing, you will put the property up for sale. If it doesn’t sell in an agreed-on period of time, you will reduce the price. Often, a short sale will be for less than the amount owed on the mortgage, and this is why it is necessary to get an attorney to handle it for you. Some banks will give you an agreement making you liable for the additional amount owed over and above the short sale, and this can be avoided with the careful eye of a foreclosure defense attorney going over the documents.
One of the requirements of a short sale is that the seller receives no financial compensation. Some banks will agree to let you have a small amount for moving expenses, but this doesn’t happen all of the time.
Pitfalls of doing a short sale without an attorney
As with any other method of handling a foreclosure, there are multiple issues that can arise during a short sale. The bank may offer unfavourable terms, they may sue you for foreclosure while the short sale is in progress – and these are just a couple of the things that can happen. Having an experienced foreclosure defense attorney on your side may not help you get more money from the short sale, but it will prevent complications that could affect your financial future.
Some real estate agents will also tell you to do a short sale – it is important to not accept advice from a non-attorney. The real estate agent doesn’t know if the bank will accept the short sale, what your financial circumstances are like, or how likely your particular bank will be to accept a short sale. A foreclosure defense attorney will take all of these factors into account and more. A short sale may not even be the best way to handle your foreclosure defense, but a real estate agent will not know this.
How a deficiency and other bank legalese can trip you up
If you owe more money than what the house ends up selling for, that difference is called a deficiency. A foreclosure defense attorney will ensure that the bank waives rights to the deficiency on a short sale. It’s important not to trust that the bank will negotiate with you as an individual in good faith on a deficiency, as some can be stealthy and will work in legal language to the agreement to make you responsible for it, no matter what they say verbally. In our experience with short sales, banks try this about 50% of the time – and this is too big of a chance to take with your finances.
The reason banks are eager to stick you with the liability for the deficiency is that they can then turn around and sell that debt as a deficiency judgement. There are companies who solely exist to purchase these judgements from banks and go after debtors for the deficiency.
A bank may also release the lien on the property, but not forgive the debt. The terms of the short sale approval letter have to be correct, and the bank has to know that you are serious about going to trial if your terms aren’t met. The best way to communicate that clearly to the bank is to have a foreclosure defense attorney handle your short sale.
Contact us today to find out more about short sales and if they are the right choice for your foreclosure defense.