Unfortunately, there are many instances where people face financial hardships that lead to the loss of the home. A short sale should be considered when the outstanding mortgage balance is greater than the property’s value.
A short sale occurs when a lender agrees to accept an amount less than what is owed to it under the mortgage so that a sale of the property can be completed.
There are a number of steps that a person needs to take when going through a short sale. First, the seller will have to agree to an offer on their home and have the lender approve it. The seller will have to demonstrate that they are, in fact, facing financial hardship and cannot pay off the mortgage. The lender will have to agree that the financial hardship exists and is preventing the seller from making these payments. The lender will have to determine whether the sale price of the home is a valid price, done through a “broker’s price opinion” or an appraiser. Finally, the lender will make their decision on whether the short sale should be approved or not.
It is important to be aware that this process can be complicated and the sale may be rejected. Some of the factors that may complicate the matter include having more than one lien on the Property, having liquid assets available that can be used to make up the difference, among others. Even if a short sale has been accepted by the lender, the seller may still be held liable for the deficiency. If the lender will not waive the deficiency you may want to reconsider whether or not the short sale makes economic sense. If the lender waives the deficiency the deficiency may be considered income to the seller.
If the amount due on your mortgage is greater than the fair market value of your house and you can’t keep up with the payments, you may want to speak with an experienced real estate attorney at Cohn Lifland to determine if a short sale or some other remedy is the best option.