What You Need to Know About Short Sales
Economic downturn or loss of employment can cause homebuyers to default on their home mortgages. Eventually, if regular payments are not made, the bank or lender will commence a foreclosure action on the home. Individuals and families facing foreclosure should not feel helpless. They still have an option to pay off the loan. A short sale is a great mechanism for borrowers where the lenders are willing to work with them to recover a portion of the mortgage. For a successful short sale experience, borrowers should be aware of the legalities of the process and how to best use them to their advantage.
What is a Short Sale?
A short sale is the sale of a home in which the proceeds from the sale falls short of what the borrower still owes on the mortgage. For example, Person A borrows $200,000 to buy a home from Bank A. Over the span of 10 years, Person A pays only pays $12,000 of the $200,000 mortgage. This leaves Person A owing $188,000 to the Bank. After year ten, Person A is in default and cannot meet the monthly payments owed to the lender. The lender initiates foreclosure proceedings against the home and the lender is responsible for the entire balance of $188,000. Here is where the short sale comes into play. With the help of an experienced short sale attorney, the lender can agree to sell the home for less than the mortgage to simply recuperate whatever they can. This is even the case if the home sells at a loss. Many lenders will agree to short sales to avoid the time consuming and costly foreclosure process.
Prepare Well for a Renegotiation
The most important part of the short sales process is getting the lender to agree to it. This is where legal counsel is invaluable. The first thing to do is to become well informed about the details of the initial home sale, purchase documents and information about short sale rates. The borrower should gather all pertinent documentation including property appraisals, mortgage documents, closing agreement, deed, etc. for review by a trusted attorney. Armed with this information and some research about market prices, the borrower can approach the lender to request a short sale. If the lender accepts the offer, then the next step is to set a sale price. This number will determine how much of a loss the lender is willing to take.
Florida Rules Governing Short Sales
In most circumstances, when borrowers seek a short sale they have stopped making payments on their home. This mechanism triggers the process for putting the property on a short sale. However, in Florida, a borrower can put a property on short sale while making regular payments. Further, in Florida, a short sale will still hurt the borrower’s credit. Borrowers should be aware of this when weighing their options. In addition, Florida allows for deficiency judgments. This means that if the property goes to foreclosure, the lender can sue the borrower for the remaining portions not recovered. This is more reason for Florida borrowers to look into a short sale. Unlike foreclosure, a short sale will relieve the borrower of any remaining portions of the owed mortgage.
Contact Us Today for Help
If you have defaulted on your home mortgage and you are facing foreclosure, a short sale may be the right option for you. We advise borrowers on the short sale process and prepare them for renegotiation with the lender. The Law Offices of Larry E. Bray, P.A. in West Palm Beach can help you understand the options available to you and create a plan that will protect your interests.