Legal Ramifications of a Short Sale

A short sale allows the property owner to close on the sale of a home/property that is worth less than the debts secured by it. In a typical situation the lender agrees to accept the net proceeds from a closing in exchange for releasing the lien. The lender is not being generous by agreeing to a short sale. They are convinced that a short sale of a property will produce a better result than a foreclosure and pursuing the borrower for the losses. The procedures for a short sale differ from lender to lender one point is the same – the lender will need to be convinced of the following:

• The sale price of the contract is equal to the amount the lender would be able to sell the property for after a foreclosure.

• The commission for the transaction is equal to the commission the lender would pay its agent for selling the property after foreclosure.

• The lender will want an explanation of circumstances that led to the short sale in the first place.

• The property owner does not have the resources to make up the shortfall on the mortgage. Financial statement will need to be provided.

The threat of foreclosure comes fast and hard for many property owners that fall into various hardships. One of the most important things a property owner can do is keep speaking with the lender. Banks are more apt to work with a debtor that is a few months behind with extenuating circumstances, than someone that appears to have given up. A bank or lenders also have an obligation to their guarantor’s to mitigate their losses. The lender’s are under social pressure to keep buyers in their homes, so it is in their best interest to work with you to resolve the situation.

In the long run a short sale may be the best option. You may even be able to go keep the equity you have built after repayment of the loan and any penalties or fees generated in the process. Find a buyer – it might be required by your lender to use an experienced real estate agent. We at The Smith Team are experienced and well versed in the short sale arena. You should consult with a qualified legal consultant when considering a short sale.