Foreclosure prevention, successful real estate short
Legal implications of a short sale.
Short sales allow a homeowner to close on the sale of property worth less
than the debts secured by it. Typically, the lender agrees to accept the net
proceeds from a closing in exchange for releasing its lien. Lenders are not
agreeing to a short sale to be generous, they are convinced that it will
come out better than it would by foreclosing on the home and pursuing the
borrower for its losses. While the procedures for a short sale will vary
from lender to lender, most lenders need to be convinced of the following:
The sales price of contract is equal to what they would be able to sell the
property for after a foreclosure. While the lender may review the market
analysis provided by the agent, they will often confirm the market analysis
by contacting its own sources, such as an appraiser.
The commission for the transaction is equal to the commission it would pay
its agent for selling the home after foreclosure. The lender will need to
know as precisely as possible the amount of proceeds it can expect to
receive from the sale.
The lender will want an explanation of the circumstances which caused short
sale in the first place. These usually include death, medical problems,
divorce, loss of a job, or a job displacement requiring a move.
The seller doesn't have the resources to make up the mortgage shortfall on
their own. The lender will require a full assessment of the financial
condition of the seller. Financial statements, income and expenses, tax
returns and the seller's paycheck stubs should be provided. The seller's
financial condition is a tricky proposition. While the lender will be
reluctant to approve a compromise without reviewing strength of the seller,
this information will help the lender in pursuing the seller for a
post-foreclosure deficiency if the short sale does not take place.
A seller with few assets, little or no income, and a willingness to file
bankruptcy has little to lose by providing this information. Those with
other assets, a good job with garnishable wages, or a desire to avoid
bankruptcy will put themselves at risk in the process. Those considering a
short sale need expert legal advice regarding the wisdom of submitting
financial information to the lender.