Short Sales 101
For decades, home ownership has provided families with stability and economic prosperity. Unfortunately, the economic downturn and dramatic fall in home prices has devastated Florida’s families and communities. More and more families can no longer afford to pay their mortgages. Even worse, home values have dropped so dramatically that they find their homes “underwater” with mortgage balances that exceed their home values.
Underwater homeowners face difficult decisions. The worst decision which can be made is doing nothing at all. Borrowers must formulate a plan of action. The key to a successful plan is a full understanding of the options available. A short sale is one such option. While many homeowners have heard of a short sale, many do not fully understand what it is.
A short sale is the sale of real estate in which the sale proceeds are less than the balance owed on the property’s loan(s). In other words, the seller does not realize enough proceeds from the sale to pay off the loan(s) in full. This leaves the homeowner with two options. The first is to make up the shortfall by bringing their own cash to the closing table, which rarely happens. The other alternative is for the homeowner to negotiate with his or her lender to get the lender to accept less than the full amount owed on the loan(s).
In a successful short sale, the lender agrees to allow the homeowner to sell the property for less than the outstanding balance of the loan(s). Lenders typically agree to a short sale when they believe that the financial loss they incur as a result would be less than the loss resulting from a foreclosure. Because lenders that agree to take less than the full balance are being “shorted”, the term short sale was created.
While a short sale can be a positive option for homeowners, it is not an easy process. The short sale process is often lengthy and frustrating, taking anywhere from a few months to over a year. Homeowners must submit a short sale package to the lender, which includes significant financial disclosures about the homeowner and the property, details regarding the homeowner’s hardship and various other legal documents required by the lender. Short sales also carry serious potential credit and legal implications. For example, if a lender approves a short sale, it does not automatically mean the homeowner will walk away from the property free and clear. For that to happen, the homeowner must negotiate a full release of liability from any deficiency balance. This is critical since lenders in Florida have few restrictions and are actively pursuing deficiency balances.
It is very important to retain the services of an experienced Coral Springs real estate lawyer to assist with the short sale process. While homeowners have the right to handle a short sale on their own, having an experienced Marathon real estate attorney who is familiar with each phase of the process can help to expedite the process and maximize the chances for an approval. When done properly, short sales are an effective tool available to underwater homeowners.
Please contact the Key Largo real estate lawyers at Law Offices Of Erik S. Bloom, P.A. today at 954-464-3210 in Broward and 305-290-0690 in Monroe County and Miami-Dade County. You may also email us to schedule an appointment.
